(TSE: 8985)

Financial Results

FY12/2018 (19th Period)

Japan Hotel REIT Investment Corporation
Japan Hotel REIT Advisors Co., Ltd.
http://www.jhrth.co.jp/en/

February 20, 2019

Table of Contents

Appendix １

Ⅰ. Settlement of Accounts for FY12/2018 - Highlights
１．FY12/2018 Highlights

3

Ⅱ. Summary of Settlement of Accounts
１．Results for the FY12/2018

6

２．Revenue Forecast for FY12/2019

7

３．Balance Sheet

8

Ⅲ. External Growth
１．Successive External Growth10

２．Summary of Two New Properties

1135

２．Simultaneous Pursuit of Stability and Upside Potential

36

３．External Growth Strategy

37

４．Internal Growth Strategy

38

５．Financial Strategy

39

６．Initiatives for Sustainability

40

７．Benefits Program for Unitholders

41

Appendix ２

Ⅳ. Portfolio

JHR's Characteristics and Strategy

１．JHR's Investment Targets

Information on Properties

１．Property List

43

２．Summary of Lease Contracts

45

１．Portfolio

17

３．Major CAPEX Ⅲ by Hotel47

２．Portfolio Diversification

18

４．The Five HMJ Hotels – Highlights

48

５．Portfolio Map

49

Ⅴ. Internal Growth
１．Rent Structures20

２．Performance of Major 21 Hotels with Variable Rent, etc.

21

３．RevPAR Variance to Previous Year by Region ofMajor 21 Hotels with Variable Rent, etc.

22

４．Active Asset Management

23

５．Capital Expenditure and Depreciation

25

Appendix ３51

２．Changes in Investment Unit Price and Market Capitalization

52

Summary of the Asset Management Company

１．Summary of the Asset Management Company

54

２．Features and Governance of the Asset Management Company 55

27

Ⅶ. Market Environment
１．Market Environment

１．Major Unitholders and Classification of Unitholders

Appendix ４

Ⅵ. Financial Conditions
１．Financial Conditions

Investors Composition and Investment Unit Price

31

1

Ⅰ. Settlement of Accounts for FY12/2018 - Highlights

１．FY12/2018 Highlights
1. External Growth(*1)▶ Strategic property replacement
Acquisition in 2017

◆Public Offering in June2017

▶ Improvement in hotel performance andincrease of rent through active asset
management

41 properties/JPY286.8Bn

End of FY12/2016

Acquired

Total AcquisitionPrice

3 properties/
JPY32.6Bn

Total Funds
Raised throughPublic Offerings

 Track Record
Major 21 hotels with variable rent, etc.
2017

2018

Variance

RevPAR (JPY)

12,84012,920+0.6%

11 HMJ Hotels

14,544

14,572+0.2%

Total Book Value Total Sales Price ofof Sold Properties Sold Properties

6 Accor Hotels

10,185

10,416+2.3%

10.1Bn JPY12.1Bn

4 the b Hotels

8,162

8,235

+0.9%

GOP (JPY MM)

17,67817,911+1.3%

32.6Bn JPY18.6Bn

JPY

44 properties/JPY319.4Bn

End of FY12/2017◆Sale of Properties in August

2018

2. Internal Growth(*2,3,4)

3 properties/▲JPY10.1Bn

Sold

(*1)

Total Gain on Sale:

1.9Bn

Sale in 2018

JPY

JPY

End of FY12/2018

41 properties/JPY309.3Bn◆Public Offering in January

2019(Planned) Acquisition

2 properties/
JPY65.1Bn

Acquisition in 2019

Total AcquisitionPrice

Total Funds
Raised throughPublic Offerings

 Forecast for FY12/2019
Major 21 hotels with variable rent, etc.

65.1Bn JPY33.3Bn

JPY

Hilton Tokyo Odaiba

Hotel Oriental Express
Osaka Shinsaibashi

(*1)
(*2)

End of April 2019
(expected)

43 properties/JPY374.5Bn

(*3)
(*4)
(*5)
(*6)

3. Strengthening of Financial Base

▶ Conservative financial management(at the end of December, 2018)
Costs for Interest- Average Life of
Bearing Debt
Debt

LTV(*5)

40.6%

1.1%

4.8 years

 Diversified funding methods by issuance ofinvestment corporation bonds• Issuance of investment corporation bonds forindividual investors (JPY10Bn)(the third time) Procurement of new loan utilizing SMBC
Environmental Assessment Loan("A" grade)(*6)
 Retained earnings by reserve for special
advanced depreciation• Retained earnings in amount of JPY1.1 billion
out of gain on sale of R&B Hotel Higashinihonbashi which JHR hold over 10 years
 Reinforcement of lender formation• New loan from Shizuoka Bank

2019

Variance

RevPAR (JPY)

13,456

+4.2%

JCR

R&I

GOP (JPY MM)

18,324+2.3%

A+ (stable)

A (stable) Status of Credit Rating

Stating total amount of the acquisition price.
The Eleven HMJ Hotels are are Kobe Meriken Park Oriental Hotel, Oriental Hotel tokyo bay, Namba Oriental Hotel, Hotel Nikko Alivila, Oriental Hotel
Hiroshima, Okinawa Marriott Resort & Spa, Sheraton Grand Hiroshima Hotel (the major facility of ACTIVE-INTER CITY HIROSHIMA), Holiday Inn Osaka
Namba, Hilton Tokyo Narita Airport, International Garden Hotel Narita and Hotel Nikko Nara. (Hotel Centraza Hakata has been implementing majorrenovation works from October 2018 to the end of March 2019 (plan). As the hotel has been suspending its hotel operation during the renovation, the hotel
is excluded from the HMJ Group.)
The Six Accor Hotels are ibis Tokyo Shinjuku, ibis Styles Kyoto Station, ibis Styles Sapporo, Mercure Sapporo, Mercure Okinawa Naha and Mercure Yokosuka.
The Four the b Hotels are the b ikebukuro, the b hachioji, the b hakata and the b suidobashi. The Six the b hotels are the Four the b hotels plus the bakasaka-mitsuke, the b ochanomizu.
Stating total asset LTV (expected) after the acquisition of Hilton Tokyo Odaiba (April 8, 2019).
For details, please refer to P.40.

3

１．FY12/2018 Highlights (cont.)
Dividends Per Unit Growth
(JPY)
4,000

The amount of sales effect(*)

3,500

98
2,155

2,000
1,500

+5.6%

+7.7%

2,975

3,000
2,500

3,683

3,420

+15.0%

3,890
204

-5.2%

(Reference: annualized effect)

3,686

+1.8%

Same
amount3,686(excluding theamount ofsales effect)+38.1% 2,877(excluding theamount ofsales effect)

FY12/2014

FY12/2015

FY12/2016

FY12/2017

FY12/2018

FY2019/12

FY12/2018

FY2019/12(15th Period)(16th Period)(17th Period)(18th Period)(19th Period)(20th Period(19th Period(20th Period(forecast))(annualized))(annualized forecast))

NAV Per Unit Growth(JPY)70,000+18.7%

60,00046,272+37.0%

40,00030,000

+0.1%

+3.0%

+2.6%

63,38579,49579,407

77,12975,20980,00050,000FY12/2014

FY12/2015

FY12/2016

FY12/2017

FY12/2018

FY2019/12(15th Period)(16th Period)(17th Period)(18th Period)(19th Period)(20th Period(forecast))

(*)

3,710

3,643

The amount of sales effect represents dividends per unit which are increasing due to sales of properties.

4

Ⅱ. Summary of Settlement of Accounts

１．Results for the FY12/2018(Unit: JPY MM)
FY12/2017(18th Period)

FY12/2018(19th Period)

Properties

Actual(A)(B)–(A)

Variance44

41

Acquisition Price

319,474309,370

Operating Revenue

25,47528,25325,47526,318843(3)Breakdown of Variance
Three
Properties
Sold in2018(*3)

Three
Properties Hotel Centraza Existing
HakataProperties
Acquired in2017(*4)(3)(10,104) (3.2%) (10,104)
2,778 10.9%

1,733

1,091

(276)

229

3.3%

(201)

1,091

(276)

229

Fixed Rent, etc.

55.8%

14,221 56.2%

14,788

567

4.0%

(128)

664

Variable Rent

44.2%

11,253 43.8%

11,529

275

2.5%

(72)

426

(276)

198

-

1,934

1,934

21,424

22,104

679

(185)

963

(280)

181

6.7%

7.1%

0.4%

3,725

4,091

366

(16)

239

(26)

168

2

2

0

0

132

35

(96)

17,563

17,974

410

5.5%

5.8%

0.3%
109

Gain on Sale ofProperties, etc.

NOI(*2)
Profit and Loss(*1)

No. of Properties

Real Estate Operating
Revenue

Dividend

Actual(B)

Variance

NOI Yield
Depreciation
Asset Retirement
Obligations Expenses
Loss on Retirement ofNoncurrent Assets
NOI after
Depreciation(*2)
NOI Yield after
Depreciation
Other Operating
Expenses

3.2%

2.3%

1,806

1,916

15,757

17,9932,235 14.2%

Ordinary Income

14,006

16,2112,205 15.7%

Net Income

14,005

16,2102,205 15.7%

769

563

(205) (26.8%)-(1,174)(1,174)
830

5.6%

207

5.6%

Number of Units Issued(Unit)

14,771

15,6024,010,847

4,010,847

Dividend per Unit (JPY)

3,683

3,890
[3,686](*6)

Total Dividends

(168)

723

(253)

Fixed rent, etc.
• Rent from office andcommercial tenants

JPY11 MM

• Utilities income, etc.

JPY20 MM
(Total)

JPY31 MM

Variable rent
• Variable rent fromthe Eight HMJ Hotels(*5)

JPY116 MM• Income from management contracts, etc.
from the Six Accor Hotels

JPY16 MM0

• Variable rent fromthe Four the b Hotels

JPY(9) MM(96)• Revenue sharing, etc.

JPY74 MM

1,934

Operating Income

Use of Negative
Goodwill
Reserve for special
advanced depreciation

31

Major Causes of Variance ofExisting Properties

109(Total)

JPY198 MM(*1) For detail, please refer to Financial Report for the Fiscal Year Ending December 31, 2018 (January 1,
2018–December 31, 2018) dated February 20, 2019.
(*2) Each is calculated using the following formula:
NOI (Net Operating Income) = Real estate operating revenue − Real estate operating costs +Depreciation + Loss on retirement of noncurrent assets + Asset retirement obligations expenses
NOI after depreciation = Real estate operating revenue − Real estate operating costs(*3) Representing R&B Hotel Higashi-nihonbashi, the b akasaka-mitsuke and the b ochanomizu, which
JHR sold in FY12/2018 (19th Period).
(*4) Representing Hilton Tokyo Narita Airport, International Garden Hotel Narita and Hotel Nikko Nara,
which JHR acquired in FY12/2017 (18th Period).
(*5) The Eight HMJ Hotels are Kobe Meriken Park Oriental Hotel, Oriental Hotel tokyo bay, Namba
Oriental Hotel, Hotel Nikko Alivila, Oriental Hotel Hiroshima, Okinawa Marriott Resort & Spa,
Sheraton Grand Hiroshima Hotel (the major facility of ACTIVE-INTER CITY HIROSHIMA) and Holiday
Inn Osaka Namba.
(*6) The figure refers to dividend per unit after excluding the amount of sales effect (reference number).

6

２．Revenue Forecast for FY12/2019(Unit: JPY MM)
FY12/2018(19th Period)

FY12/2019(20th Period)
(*1)

Prope
rties

Actual(A)

No. of Properties
Acquisition Price
Operating Revenue
Real Estate Operating
Revenue
Fixed Rent, etc.
Variable Rent
Gain on Sale ofProperties, etc.
Operating Expenses
related to Properties
NOI

Profit and LossNOI Yield
Depreciation
Asset Retirement
Obligations Expenses
Loss on Retirement ofNoncurrent Assets
NOI after Depreciation
NOI Yield after
Depreciation
Other Operating
Expenses
Operating Income
Non-Operating Income
Non-Operating Expenses

Dividend

Ordinary Income
Extraordinary losses andcorporate tax
Net Income
Use of negative goodwill
Reserve for special
advanced depreciation
Total Dividends
Number of Units Issued(Unit)
Dividend per Unit (JPY)

56.2%
43.8%

Comparison with Previous Period

Forecast(B)(B)-(A)41
309,37043
374,508

28,253
26,31814,788 58.8%
11,529 41.2%

Three
Three
Properties to Properties Existing
Variance
be Acquired
Sold in
Properties
in 2019(*2)
20182
65,13821.1%

2
65,13828,876622

2.2%

2,402 (2,214)

434

28,876

2,557

9.7%

2,402

(279)

434

16,98911,886

2,200
356

14.9%
3.1%

2,367
34

(199)
(79)

32
402

1,934

-

(1,934)

4,214

4,377

163

22,1047.1%
4,091

24,498
6.5%
4,663

2,394
(0.6%)
571

2

2

0

0

35

247

211

211

17,974

19,584

1,610

5.8%

5.2%

(0.6%)

1,916

2,213

297

17,99331
1,813
16,211

17,3710
2,096
15,274

(621)
(31)
283
(936)

1

1

16,21015,273563

1,177(1,174)

-

(936)

9.0%

7

(27)

183

2,394

(251)

251

272

(34)

334

2,121

613 108.9%
846

5.4%

451,500

11.3%

3,890

3,686

(204)

(5.2%)

(216)

(294)

JPY(9) MM(Total)

JPY32 MM

Variable rent
• Variable rent from the Twelve HMJ Hotels(*3)

JPY255 MM• Income from management contracts, etc.
from the Six Accor Hotels

JPY169 MM• Revenue sharing, etc.

JPY(22) MM(Total)

JPY402 MM

Use of Negative Goodwill(*4)
FY12/201850-year amortization amount

JPY262 MM

Loss on retirement of noncurrent assets

JPY35 MM

Correspondence to major renovation work

JPY265 MM
JPY563 MM

50-year amortization amount

JPY262 MM

Loss on retirement of noncurrent assets

JPY247 MM

Correspondence to major renovation work

JPY357 MM
JPY310 MM(Total)1,174

16,448

JPY18 MM

Correspondence to dilution, etc.

(5.8%)

4,462,347

JPY22 MM

• Rent from office and commercial tenants

FY12/2019(5.8%)

15,602• Fixed rent of HOTEL ASCENT FUKUOKA(Total)(3.5%)

4,010,847

Fixed rent

• Utilities income, etc.

(1,934)
10.8%

Major Causes of Variance of Existing Properties

JPY1,177 MM(*1) For detail, please refer to Financial Report for the Fiscal Year Ending December 31, 2018 (January 1,
2018–December 31, 2018) dated February 20, 2019.
(*2) Representing Hilton Tokyo Odaiba and Hotel Oriental Express Osaka Shinsaibashi, which JHR plansto acquire in FY12/2019 (20th Period).
(*3) The Twelve HMJ Hotels are the Eleven HMJ Hotels plus Hotel Centraza Hakata.
(*4) Please refer to P.29 for the use of negative goodwill (reserve for temporary difference adjustment).

7

３．Balance Sheet(Unit: JPY MM)
FY12/2018
End of Fiscal
Year2018.12.31

Variance

30,91940,266

9,346

27,92037,184

9,264

Operating Accounts Payable

2,411
587
320,859
283,0662,474
607
309,993272,88962
20(10,865)(10,176)

Short-Term Loans Payable

Buildings in Trust(*2)

109,983

107,874(2,109)Land in Trust

171,618

163,151(8,466)

Others(*3)

1,465

1,864

398

Intangible Assets

34,171
3,621

33,915
3,188

(255)
(433)

170

162

(8)

3,450
404

3,025
296

(425)
(107)

ASSETS

FY12/2017
End of Fiscal
Year(As of ) 2017.12.31

Current Assets
Cash and Deposits(*1)
Operating Accounts Receivables
OthersNoncurrent Assets
Net Property and Equipment

Other Assets
Leasehold and Security
Deposits
OthersDeferred Assets

FY12/2018
End of Fiscal
Year2018.12.31

Variance

21,161

17,021(4,140)

909

1,941

1,031

3,000

0

(3,000)

0

2,000

2,000

15,022

11,117(3,905)

Accounts Payable

1,211

1,028

(183)

Advances Received

900

882

(18)

Others

116

52

(64)

129,058

130,163

1,105

23,60098,777
5,694
504
482
150,219

31,60091,954
5,634
514
459
147,184

8,000(6,823)
(59)
10
(22)
(3,035)

153,516
21,746

153,516
21,746––

13,127

12,357(769)

14,005

16,213

2,207

(431)
201,963352,183(461)
203,372
350,556(29)
1,408(1,626)

LIABILITIESFY12/2017
End of Fiscal
Year(As of ) 2017.12.31

Current Liabilities

Current Portion of Investment Corporate
Bonds Payable
Current Portion of Long-Term Loans
PayableLong-Term Liabilities
Investment Corporation Bonds
Long-Term Loans Payable
Tenant Leasehold and Security Deposits
Derivative Liabilities
OthersTOTAL LIABILITIESNET ASSETS
Unitholders' Capital
Capital Surplus
Reserve for Temporary Difference
Adjustment
Unappropriated Retained Earnings(midterm/year)
OthersTOTAL ASSETS

352,183

350,556(1,626)TOTAL NET ASSETSTOTAL LIABILITIES AND NET ASSETS(*1) Cash and deposits in trust is included.
(*2) The sum of buildings in trust, structures in trust, machinery and equipment in trust, tools, furniture and fixtures in trust, and construction in progress in trust.
(*3) The sum of machinery and equipment, tools, furniture and fixtures, and construction in progress.

8

Ⅲ. External Growth１．Successive External Growth Improvement of the quality of JHR's portfolio and successive external growth through strategic asset replacement
Growth in Asset Size(*1) (JPY MM)+21.4%+7.0%

130,883

122,285
April 2012
(merger)NOI Yield(*2)

NOI Yield after
Depreciation(*2)
NAV per Unit
No. of Properties
No. of Acquisition
Acquisition Price
No. of Dispositions
Sale Price

Acquisition PriceAppraisal Value
Average NOI Yield
Type of Hotels
Grade of Hotels

225,723

319,474+21.1%

309,370

374,508

FY12/2019(20th Period)(annualized effect)

–

6.2%

6.2%

6.3%

6.6%

6.6%

6.7%

7.1%

6.5% (6.7%)

–

4.5%

4.8%

5.0%

5.3%

5.4%

5.5%

5.8%

5.2% (5.4%)–
28

JPY32,32128
2
JPY10.8Bn
2
JPY0.8Bn

JPY36,074
28
2
JPY32.6Bn
2
JPY2.6Bn

JPY46,27230
3
JPY15.7Bn
1
JPY0.7Bn

JPY63,385
36
9
JPY57.0Bn
3
JPY4.8Bn

JPY75,209
41
5
JPY61.0Bn

JPY77,12944
3
JPY32.6Bn

JPY79,407
41

Three properties sold in 2018

Two properties to be acquired in 2019

JPY10,104MM
JPY10,460MM(*3)
3.6%(*4)
Limited-service
Economy/Mid-price

JPY65,138MM
JPY68,850MM
4.5%(*6)
Full-service/Limited-service
Upper-middle/Mid-price

JPY10,215MM(*5)

Sale Price

JPY12,150MM

Disposed
Properties

173,429

286,801-3.2%

FY12/2012
FY12/2013
FY12/2014
FY12/2015
FY12/2016
FY12/2017
FY12/2018(13th Period) (14th Period) (15th Period) (16th Period) (17th Period) (18th Period) (19th Period)

Book Value

Gain on Sale

+30.2%+9.1%

158,902+27.1%+11.4%

Asset
Replacement

3
JPY12.1Bn

JPY1,934MM

R&B Hotel Higashi-nihonbashi
the b akasaka-mitsuke
the b ochanomizu

Hilton Tokyo Odaiba

10

Hotel Oriental Express Osaka Shinsaibashi

Aim forSuccessive
Growth

JPY79,495
43
2
JPY65.1Bn(*1) Asset side is based on the aggregate(anticipated) acquisition price of theproperties at the end of each fiscal period.
(*2) NOI yield for FY12/2012 is hypotheticalannualized based on actual NOI after
merger.
(*3) As of June 30, 2018(*4) NOI yield to sale price.
NOI is the actual for FY12/2017.
(*5) As of the date of the sale.
(*6) NOI yield is calculated based on annualized
effect (forecast) for FY12/2019.

２-１．Summary of Two New Properties: Hilton Tokyo Odaiba
 An acquisition of largest(*1) asset in our portfolio and trophy asset for JHR
 Scarce large-scale full-service hotel in the middle of Tokyo

Hilton Tokyo Odaiba (plan to acquire on April 8, 2019)

AnticipatedAcquisition Price

JPY62,400MM

Type/Grade

Full-service/Upper-middle

Number of Rooms
Lease Term

April 8, 2019 – December 31, 2029

NOI Yield(*2)

4.4%

Brand/Operator

Hilton/HMJ Group

Rent Structure

Fixed + Variable••••

FeatureChanges in KPI(*3)
ADR (left axis)(JPY)
35,00030,00026,417

RevPAR (left axis)

27,51325,00020,00015,00021,483

24,692

27,97426,60028,30930,420

0

(*1)
(*2)
(*3)
(*4)
(*5)
(*6)

UK

50

89.7%

95.1%

94.0%

94.7%

2015

2016

2017

2018

–
43.0%

2,625
55.5%

3,097
54.0%

2019
(expected)
3,094

1.7%

0

 Fixed rent: JPY3.1Bn/year
Japan

New

Zealand Korea
2.8% 4.1%

46.0%

China
8.9%

Rent Structure<From April 8, 2019 to December 31, 2021>

Others16.1%

2.6%

28,79481.3%

GOP (JPY MM)% of Inbound Visitors(*4)

Australia(%)
100

10,0005,000

Large full-service hotel with scarce 4 star recognition
Change the contract with "Hilton", and HMJ will operate the hotel
Attract active demand for both leisure and business purposes
Seek to raise its profile and upside potential by leveraging advertising
effectiveness from 2020 Tokyo Olympic and Paralympic Games

Guest Room Sales by Country(*5)

Occupancy Rates (right axis)

30,108453

 Variable rent:
In case AGOP(*6) exceeds AGOP base amount(JPY2.97Bn a year), the amount arrived bymultiplying 30% to the exceeded amount<From January 1, 2022 to December 31, 2029>

USA Fixed rent: JPY1.6Bn/year

17.8%

 Variable rent:
In case AGOP exceeds AGOP base amount(JPY1.66Bn a year), the amount arrived bymultiplying 98% to the exceeded amount

Based on the acquisition price.
NOI yield is calculated based on the annualized effect for FY12/2019 (forecast).
All the data is on an unaudited basis and shared by the current owner as Hilton Tokyo Odaiba has not been acquired yet. ADR and RevPAR include service charge.
These data are not necessarily calculated by accounting treatment, etc. adopted by JHR. JHR and Japan Hotel REIT Advisors Co., Ltd. (hereinafter called "JHRA") cannot guarantee accuracy of the numbers.
% of Inbound visitors is calculated based on numbers of guest rooms sold.
Guest room sales by country is calculated based on numbers of guest rooms sold.
AGOP (adjusted GOP) is the amount calculated by subtracting certain fees and other items from GOP.

11

２-１．Summary of Two New Properties: Tokyo Market
 Largest market which attracts stable demand from both domestic and inbound visitors for leisure and business Scarcity of 4-star and 5-star hotels in Japan (Hilton Tokyo Odaiba has a 4-star rating)
Changes in Number of Arrival and Departure andNumber of Passengers in Haneda Airport

Number of Nights Spent at Lodging Facilities in Tokyo(thousands)
60,00049,18940,00020,00016.9%

52,824

18.6%

54,25824.3%
41,06359,08757,51459,949

29.7%

31.4%

33.0%

41,52739,45442,993

8,291

9,830

13,195

17,56018,059

2012

2013

2014

2015

2016

No. of Japanese Overnight Guests
Inbound Ratio

90,00030%

40,8980(thousand passengers)

45%

40,17315%
0%

020,000

7,702

10,000+20.7%
5,556+19.8%
4,623

Kyoto

Okinawa

5,000
0

Tokyo

Osaka

Hokkaido

62,16260,44962,50064,935200

7,952

10,511

12,637

15,042

16,730

2013

2014

2015

2016

2017

20

40

New York
London
Paris
Dubai
Miami
Los Angeles
Bali
Shanghai
Washington
Rome+16.6%+17.5%

2012

0

19,775

11,672

58,791
7,910

201

220

68,405180

Number of 4-Star and 5-Star Hotels by Major City

+9.5%

15,000195

75,137219

Number of Passengers in International Flight (left axis)
Number of Passengers in Domestic Flight (left axis)
Number of Arrival and Departure (right axis)
Source: Airport Management Report by Year and by fiscal year by Ministry of Land, Infrastructure,
Transport and Tourism
Note: Transit Passenger does not included in each figure.

No. of Inbound Overnight Guests

Number of Nights Spent by Inbound Guests by
Prefecture (Top 5) (2017)
25,000212

30,000Source: Statistic research of trip with lodging by Japan Tourism Agency
Note: Number of nights spent by domestic guests are calculated as total number of nights spent minus
the number of nights spent by inbound guests.

(thousands)

72,673

68,40160,00019,775
2017

66,701(thousand times)
85,13579,977
240
226
224

Tokyo

Source: Japan Tourism Agency
Note: % in the chart indicates changes against 2016.

60

48
47
47
45

54

80

69
65

100

82

28

Source: Prepared by the Asset Manager based on data on Five Star Alliance web site
Note: As of November 30

12

120
115
113

２-１．Summary of Two New Properties: Odaiba Market
 Has good access to Haneda Airport and major tourist spots in Tokyo and area itself has many tourist attractions
 Improvement of tourism infrastructure is underway for Tokyo Olympics and Paralympics. Successive growth of demand is expected
after 2020
Changes in Number of International Tourist Arrivals
Tourist Attractions in Odaiba Area/Waterfront of Tokyo
after Olympics and Paralympics(times)
1.25
1.20
1.15
1.10
1.05
1.00
0.95

Greece (Athens Olympics in 2004)
UK (London Olympics in 2012)
China (Beijing Olympics in 2008)
Brazil (Rio de Janeiro Olympics in 2016)

Olympic

One year

Two years

Three years

Four years

year

after

after

after

after

Source: Prepared by the Asset Manager based on the data from "International tourism,
number of arrivals" by World Bank and "Tourism Highlights 2018 Edition" by UNWTO(*1) The data were calculated in the past and those are not guaranteed for the change after
Tokyo Olympics and Paralympics.
(*2) Figures one year after Olympic in Brazil are estimated figures.

Track Record and Target of Number of Cruise Ship
Passengers in the Tokyo Bay area
(thousands)
600

502

400
200
0

34
FY2016 (actual)

FY2020 (target)

FY2028 (target)

Source: "Tokyo Cruise Vision", "Annual Plan for 'Action Plan for 2020' and 'Track Record at
the end of FY2016'" by Tokyo Metropolitan Government

The facilities colored by █ are planned to be used for venues for Tokyo Olympic and Paralympic.
The name of sports planned to be held are written inside the bracket.

(*)

210

Rainbow Bridge, Fuji Television Head Office Building and Tokyo Big Sight, etc are facilities located in Odaiba area, and JHR has no plan to acquire these facilities at this moment.

13

２-２．Summary of Two New Properties:
Hotel Oriental Express Osaka Shinsaibashi
 Newly-built hotel located in "Osaka Minami" area, one of Kansai's foremost tourist destinations
 Expected to benefit from inbound demand with capacity to accommodate two or more person in all guest rooms

Hotel Oriental Express Osaka Shinsaibashi
AnticipatedAcquisition Price

JPY2,738MM

Type/Grade

Limited-service/Mid-price124 (16 Double room/107 Twin Room/1 Universal Room(*1))

Number of Rooms
Lease Term

April 2, 2018 – March 31, 2028

NOI Yield(*2)

6.0%

Brand/Operator

Oriental (Domestic Brand)/HMJ Group(*3)

Fixed + Variable

Rent Structure• Newly- built hotel which HMJ Group has been involved since development andmanaged since its opening• Expected to benefit from inbound visitors capacity to accommodate two or more
person in all guest rooms• Realize synergies with two other hotels operated by HMJ Group in the same area

FeatureBreakdown of Room Type of Hotels"Osaka Minami" Area(*4)

Hotels in "Osaka Minami" Area owned by JHR
Hotel Oriental Express
Osaka Shinsaibashi
1%

3%

Namba
Oriental Hotel

13%
29%

23%

18%

Holiday Inn
Osaka Namba

23%
40%

46%

86%
Single/Semi-double Room

(*1)
(*2)
(*3)
(*4)

Rent Structure

Twin Room Variable rent:
In case GOP exceeds GOP base amount (JPY128MM ayear), the amount arrived by multiplying 91% to theexceeded amount

48%

12%

59%
Double Room

 Fixed rent: JPY110.4MM/years

Others"Universal room" is a barrier-free room type with consideration to the use of a wheel-chair.
NOI yield is hypothetical annualized NOI yield for FY12/2019 (forecast).
Rent structure from April 2, 2019 to June 30, 2019 is fixed rent only (JPY9,500 thousands/month).
For Osaka Minami Area, data were prepared by the Asset Manager based on the data as of September 30, 2018 from large travel agency (excludes Capsule Hotels and Sauna).

14

２-２． Summary of Two New Properties: Osaka Market
 Osaka's Minami has strength to attract inbound demand through highly convenient transportation access to various tourist
site in Osaka and surrounding major cities such as Kyoto, Nara and Kobe
Status of Area Surrounding Hotel Oriental Express Osaka Shinsaibashi

Characteristics of "Osaka Minami" Area
Highly Convenient Transportation Access Approx. 6 minutes to Umeda Station and approx. 13
minutes to Shin-Osaka Station via Osaka Metro Midosuji
Line from Shinsaibashi Station
 Allows easy access to Osaka Business Park and Kyobashi by
way of Osaka Metro Nagahori Tsurumi-ryokuchi Line
 Good access to surrounding major cities such as Kyoto,
Nara and Kobe, and Kansai International Airport by train

Surrounding Facilities

Yumeshima
Osaka Kansai
Expo Venue (plan))

Grand Front Osaka

Osaka Castle

Yumeshima(Osaka Kansai Expo Venue in 2025) (plan)

Universal Studios Japan

Kyocera Dome
Osaka
Tsutenkaku

Tennoji Zoo

15

DotomboriABENO
HARUKAS

Ⅳ. Portfolio

１．Portfolio Portfolio consisting of competitive hotels in areas with strong leisure lodging demand Selectively invest in locations with high growth potential of leisure demand such as Strategic Investment Areas
Portfolio Summary

Strategic Investment Areas and Locations of Properties(Plan as of the end of April 2019)

Properties (to be) Acquired in 2019

Total Assets
JPY3,745Bn

Existing properties
Strategic Investment Areas

Hokkaido Area
No. of Hotels

Okinawa Area

43 Hotels( 34 in Strategic Investment Areas)

No. of Guest Rooms

11,676 Rooms

Tokyo & the Bay Area(*1)

Fukuoka
Area

Osaka/Kyoto Area(*2)
Tokyo 23 wards(*1) Bay Area includes the coastal area of Tokyo Bay in Kanagawa and Chiba prefectures.
(*2) Osaka/Kyoto Area refers to Osaka and Kyoto prefectures.

17

２．Diversification of Portfolio
 Widely diversified and high-quality portfolio Appeal to inbound visitors by international brands
By Area and Rent(*1)

By Hotel Brand(*2)(F) 0.8%(F) 1.6%(V) 2.0%

Dormy Inn, etc.

(V)

(V)
3.2%

4.5%

Hotel Nikko
8%

the b (Ishin Hotels
Group) 3%

Hokkaido
5.3%
Chugoku
6.8% Chubu
4.8%
Kyushu(excluding Okinawa)
6.4%

5.1%

14%

4%

(F)
4.8%

(F)

Oriental Hotel

15%(Kyoritsu Maintenance)

(F)
16.9%

(V) 1.3%

Others

(V)

(F)

5%
Mariott

International Brand: 55%

13.2%

By Grade(*2)

4.2%

Fixed Rent (F)
59.9%

(V)
5.3%

By Hotel Type(*2)

Economy
5%

7.4%

(V)

4%

31%

(F)

(V)

(F)

Sheraton

HiltonKanto(excluding Tokyo)
20.6%

6.3%
4.6%

7%

8%

3.3%

Okinawa
14.6%
Kansai(excluding Osaka)
8.8%
Osaka
12.3%

8.4%

(IHG)

ibis/Mercure (Accor)

(V)

Tokyo
20.3%

Holiday Inn

(F)
6.9%

LuxuryResort21%

21%

Mid-price
44%

Variable Rent (V)40.1%(*1) Based on the annualized rent in revenue forecast of FY12/2019(*2) Based on the acquisition price18

Limitedservice
33%

Uppermiddle

Full-service

31%

47%

Ⅴ. Internal Growth１．Rent Structures
Stability

Upside(FY12/2019 estimated)

Rent Structure(*1)

Fixed rent

Fixed rent +Revenue sharing

Fixed rent + Variable rent

Variable rentManagement contract

Type of Contract

Lease contract

Lease contract

Lease contract

Lease contract

Management contract

○

○

○

–

–

–

–

A certain percentage of sales
exceeding the threshold

A certain percentage of
hotel GOP

A certain percentage of hotelrevenue or hotel GOP

Hotel GOP–

JPY2,797MM(9.4%)

JPY3,715MM(12.5%)

JPY18,099MM(60.8%)

JPY1,841MM(6.2%)

JPY3,299MM(11.1%)

JPY29,753MM(100.0%)

Fixed Rent,
etc.(*2) (%)

JPY2,797MM(9.4%)

JPY3,287MM(11.0%)

JPY10,763MM(36.2%)

JPY521MM(1.8%)JPY462MM(1.6%)

JPY17,832MM(59.9%)

Variable
Rent (%)–

JPY428MM(1.4%)

JPY7,335MM(24.7%)

JPY1,319MM(4.4%)

JPY2,837MM(9.5%)

JPY11,921MM(40.1%)

Involvement inHotel Operation

Low

Low

High

High

High

–

CAPEX Paid by JHR

1) Renewal of building andfacilities

1) Renewal of building
and facilities<3) Strategic investment>

1) Renewal of building andfacilities
2) Fixtures and equipment
3) Strategic investment

1) Renewal of building andfacilities
2) Fixtures and equipment
3) Strategic investment

1) Renewal of building andfacilities
2) Fixtures and equipment
3) Strategic investment–

Type of
Rent

Fixed

Total

Variable

Real Estate
Operating Revenue(%)(breakdown)(annualized forecast for
FY12/2019)

No. of Properties

11

6

18

3

5

43

Acquisition Price(%)

JPY37,300MM(10.0%)JPY44,216MM(11.8%)

JPY245,628MM(65.6%)

JPY17,723MM(4.7%)

JPY29,640MM(7.9%)JPY374,508MM(100.0%)

The Beach Tower Okinawa

Hilton Tokyo Bay

The Twelve HMJ Hotels

Hilton Nagoya

ibis Tokyo Shinjuku

Hotel Francs

Hotel Keihan Universal City

the b ikebukuro

Mercure Yokosuka

ibis Styles Kyoto Station

CANDEO HOTELS
UENO-KOEN

Hotel Sunroute Shinbashi

the b hachioji

Chisun Inn Kamata

ibis Styles Sapporo

HOTEL ASCENT FUKUOKA

Smile Hotel
Nihombashi Mitsukoshimae

the b hakata

Mercure Sapporo

And other hotels

Hotel Vista Kamata Tokyo

the b suidobashi

Mercure Okinawa Naha

HotelsComfort Hotel Tokyo
Higashi Nihombashi＜Acquisition in 2019 (plan)＞

Hilton Tokyo Odaiba
Hotel Oriental Express Osaka
Shinsaibashi(*1) Rent structure is categorized according to the rent contract for hotels of each acquired asset.
(*2) Fixed rent includes fixed rent and utility income based on rent contract from non-hotel portion (offices, signage, car parks, retail shops, etc.) of acquired asset.

20–

２．Performance of Major 21 Hotels with Variable Rent, etc.
Total of Major 21 Hotels with Variable Rent, etc.

Total of HMJ11 Hotels

Changes in 3KPIs

Changes in 3KPIs

Occupancy (right axis)(JPY)
18,00015,00012,0009,000

14,627

12,840

+1.3%

+0.6%

ADR (left axis)
14,814+2.1%

RevPAR (left axis)
100%

15,12180%
12,920+4.2%

13,456

60%
40%

6,000
3,000
0

87.8%

87.2%

89.0%

2017

2018

2019
(forecast)

Changes in GOP(JPY MM)
20,00016,490 +1.0% 16,656 +1.6% 16,923

15,00012,00014,544+0.2%

14,572+3.6%

15,095

3,000

0%

0

88.2%

87.5%

89.2%

2017

2018

2019
(forecast)

Changes in GOP
20,00018,324

17,911

17,678

+2.3%

+1.3%

16,00012,000

2018

8,000

2019
(forecast)

21

+1.8%

+1.7%

2017

14,202

13,95013,72412,000

2017

80%

40%

6,000

20%

100%

60%

9,000

(JPY MM)

16,000

8,000

(JPY)
18,00020182019(forecast)

20%0%３．RevPAR Variance to Previous Year by Region of Major 21 Hotels with
Variable Rent, etc.
 Diverse Portfolio Growth in RevPAR was achieved in many major cities
Total of 21 Properties

Hokkaido (2 properties)
+9.1%

+4.1%

+0.6%

-0.0%
2018 vs 20172019(forecast) vs 20182018 vs 20172019(forecast) vs 2018

 ibis Styles Sapporo
 Mercure Sapporo

Hiroshima (2 properties)
Okinawa (3 properties)
+7.8%

-2.0%

2018 vs 20172019(forecast) vs 2018

 Hotel Nikko Alivila
 Okinawa Marriott Resort & Spa Mercure Okinawa Naha

Narita (2 properties)
+6.3%

+3.4%

+3.0%

2018 vs 20172019(forecast) vs 20182018 vs 2017

 Oriental Hotel Hiroshima
 ACTIVE-INTER CITY HIROSHIMA(Sheraton Grand Hiroshima Hotel)

2019(forecast) vs 2018

 Hilton Tokyo Narita Airport
 International Garden Hotel Narita

Tokyo and Bay Area (5 properties)+5.2%

Fukuoka (1 Property)
+0.4%

+2.3%

+4.0%

Osaka, Kyoto (3 properties)+5.3%

2018 vs 2017

 Oriental Hoteltokyo bay
 ibis Tokyo Shinjuku-0.1%
 the b ikebukuro2019(forecast) vs 2018  the b hachioji
 the b suidobashi-5.1%
2018 vs 2017

 the b hakata(*)

2019(forecast) vs 20182018 vs 2017

Stating major hotels in each area out of major 21 hotels under variable rent, etc.

22

2019(forecast) vs 2018

 Namba Oriental Hotel Holiday Inn Osaka Namba
 ibis Styles Kyoto Station

Properties owned by JHR

４．Active Asset Management
 Implement Active Asset Management at both hotel and REIT sides
 Accelerate internal growth through both revenue enhancement and cost control

HotelsExamples of Active Asset Management
Improvement of Hotel
Revenue
Reduction of Hotel
Operating Costs

 Strategic capital expenditure (e.g., renovation of rooms to increase RevPAR) Rebranding according to each hotel's characteristics
 Synergy from sharing guest by hotels located nearby in the same group Renewal of a hotel booking system Integration of back-office operations
 Optimization of staffing● Cost reduction by joint purchasing in the same group
 Reduction of utility costs

REIT

Improve GOP

Improvement of Real
Estate Operating Revenue Rent increase by revision of rent scheme, etc.
⇒ The Five HMJ Hotels(*), CANDEO HOTELS UENO-KOEN, Chisun Inn Kamata,Comfort Hotel Tokyo Higashi Nihombashi, HOTEL ASCENT FUKUOKA, and rent
from non-hotel tenant, etc.

Reduction of Real Estate
Operating Costs

 Reduction of cost for Property Management and Trust, management contract fee,and ground rent, etc.
Improve NOI

Maximize DPU(*)

The five HMJ hotels are Kobe Meriken Park Oriental Hotel, Oriental Hotel tokyo bay, Namba Oriental Hotel, Hotel Nikko Alivila and Oriental Hotel Hiroshima.

23

４．Active Asset Management (cont.) Promote internal growth through renovation and rebrand, etc. as a part of Active Asset Management strategy
 Increase rent through revision of rent scheme, etc.
Hotel Centraza Hakata
Renovation of the Entire Building and Rebranding in Progress

Track Record of Rent Scheme Revision

 Schedule•

Chisun Inn Kamata
Fixed-rent

October 1, 2018 to March 31, 2019 (plan)

Jul 2012

 Rebranding (change of hotel name)•

Variable-rentHotel Vista Kamata Tokyo
Fixed-rent

Planning to rebrand and open the hotel as "Oriental Hotel
Fukuoka Hakata Station" in April 9, 2019
Aim to improve position of its hotel grade by renovation of theentire building and rebranding of the hotel in a prime location in
front of Hakata Station

Apr 2014•

Fixed and Revenue Sharing

ibis Tokyo Shinjuku
Changed to Management Contract

Jul 2014

 Increase in the number of rooms and improve ADR
Increase number of rooms from 194 to 221
Add value by making all room types to double rooms or larger andset up facilities (gym and others) for exclusive use by hotel guests

Dec 2014•

Fixed-rent•

Jul 2015•

Jan 2019

Fixed and Revenue Sharing

ibis Styles Sapporo
the b suidobashi
Fixed-rent

Jul 2017

Jan 2018

Hotel Keihan Universal City

Changed to Management Contract•

Utilized JPY265MM in FY12/2018 and plan to utilize JPY357MM in
FY12/2019

Fixed and Revenue Sharing

Fixed-rent•

 Mitigate impact on dividend caused by suspension of hotel
operation by using negative goodwill

Smile Hotel Nihombashi Mitsukoshimae

Fixed and Variable-rent

CANDEO HOTELS UENO-KOEN
Fixed-rent Increase•

Comfort Hotel Tokyo Higashi Nihombashi
Fixed-rent•

Fixed and Revenue Sharing

ibis Styles Kyoto Station
Reduction of Management Contract Fee

2019年4月

Guest room (image after renovation)•

HOTEL ASCENT FUKUOKA
Fixed-rent/
Traditional Lease

Front Lobby (image after renovation)

24

Fixed-rent Increase/
Fixed-lease５．Capital Expenditures and Depreciation
 Strengthen competitiveness and improve asset value by continuing investment in CAPEX(JPY MM)

7,000

6,000

5,000

Total CAPEX
including the renovation
at Hotel Centraza Hakata

Clarification of CAPEX

6,778

CAPEX Ⅰ

capital investment related to renewal of buildings, facilities, and equipment which is
required to maintain proper values of propertiesCAPEX Ⅱ

capital investment for fixtures and furnishings that are not directly related to building
structures or facilities but necessary for operating hotels

CAPEX Ⅲ

strategic capital investment for renewals including guest rooms, banquet rooms, restaurant
and others in order to maintain or to improve the competitiveness of the hotels

1,263

Depreciation

3,100

4,663
4,091
3,725

4,000
3,294
2,772

3,000
2,214

2,297

2,000
1,079
1,000

0

Asset Size
(JPY MM)

(*)

1,306
854
58
167

343
203

622

629

760

130,883

158,902

FY12/2012(*)

FY12/2013

258
198

2,619

2,400

783

1,811
36

2,898
469

1,837

Excluding the renovation
at Hotel Centraza Hakata

3,678

3,056

454

476

853

475

781

1,954

1,798

511

640

2,369

1,134

1,324

173,429

225,723

286,801

319,474309,370

374,508

FY12/2014

FY12/2015

FY12/2016

FY12/2017

FY12/2018

FY12/2019 (forecast)Since FY12/2012 is irregular nine months period, the numbers for capital expenditure in FY12/2012 are the accumulated actual numbers from January to December, 2012. On the other hand, the number for
depreciation is the annualized number.

25

Ⅵ. Financial Conditions

１．Financial Conditions
Changes in LTV (total Asset Base)
45.0%

43.1%

40.6%

39.9%

39.7%

Long-term(scheduled repayment
within one year)

39.0%

End of

End of

End of

End of

End of

End of

FY12/2015

FY12/2016

FY12/2017

FY12/2018

April 2019(15th Period) (16th Period) (17th Period) (18th Period) (19th Period)(expected)

1.7%

1.6%
3.3 years

5.0 years

4.8 years

3.7 years

1.2%

1.0%

1.1%

End of FY12/2014 End of FY12/2015 End of FY12/2016 End of FY12/2017 End of FY12/2018(16th Period)

15,000(as of the end of December 2018)Loans(17th Period)(18th Period)

19,000Investment Corporation Bonds
17,35016,90015,772 15,550

13,117 12,782
2,000

2.0
1.1%

(15th Period)(JPY MM)
20,000

5.0

3.0
1.2%

97.7%

Repayment Schedule of Interest-Bearing Debt

4.0

1.5%

1.4%

90.4%

As of the end of
Dec. 2018

94.0%

6.0
4.7 years

88.9%

As of the end of
Dec. 2017(year)

Costs for Interest-Bearing Debt

9.6%

Fixed Interest Rate Ratio

Changes in Costs for Interest-Bearing Debt(*1) and
Average Life of Debt(*2)
Average Life of Debt

3.5%
7.5%

(*) Long-term represents debts
with original maturity over one
year, and short-term represents
debts with original maturity
within one year.

FY12/2014

As of the end of Dec. 2018

Long-term(*) LTV as of the end of each period/year. LTV for the end of April 2019 is expected to be 40.6%.

1.8%

As of the end of Dec. 2017

Short term

42.8%

40.0%

35.0%

Term of Interest-Bearing Debt

1,000

12,300 6,000
1,500

10,000

1.0
5,000

0.0

11,117

10,00013,10014,55010,800 10,900

3,900
4,250

(19th Period)0(*1) Weighted-average costs for interest-bearing debt (including up-front fee, etc.) as of the end ofeach period/year. Rounded off to one decimal place.
(*2) Average life of debt as of the end of each period/year.

27

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

１．Financial Conditions (cont.)
Lender List for Interest-Bearing Debt

Breakdown of Interest-Bearing Debt
(Unit: JPY MM)

Balance(as of the end of
Dec. 2017)

Balance(as of the end ofJun. 2018)

Balance%

Balance%

Sumitomo Mitsui Banking Corporation

29,632

21.1%

26,431

19.3%(3,201)

Shinsei Bank, Ltd.

16,492

11.7%

15,03511.0%(1,457)

Mizuho Bank, Ltd.

16,48011.7%

15,03011.0%(1,450)Sumitomo Mitsui Trust Bank, Limited

11,495

8.2%

10,540

7.7%

(955)

Resona Bank, Limited

10,073

7.2%

9,360

6.8%

(713)

The Nomura Trust and Banking Co., Ltd.

4,858

3.5%

4,190

3.1%

(668)

MUFG Bank, Ltd.

4,135

2.9%

4,135

3.0%

0

Development Bank of Japan Inc.

3,780

2.7%

3,780

2.8%

0

Fukuoka Bank, Ltd.

3,260

2.3%

3,610

2.6%

350

Hiroshima Bank, Ltd.

2,427

1.7%

2,927

2.1%

500

The Chiba Bank, Ltd.

2,705

1.9%

2,670

2.0%

(35)

Aozora Bank, Ltd.

2,435

1.7%

2,435

1.8%

0

The Nishi-Nippon City Bank, Ltd.

1,000

0.7%

1,600

1.2%

600

929

0.7%

828

0.6%

(101)

7,097

5.1%

0

0.0%

(7,097)

–

–

500

0.4%

500

Lenders/Bond Name

Sompo Japan Nipponkoa Insurance Inc.
The Tokyo Star Bank, Limited
The Shizuoka Bank, Ltd.
Total of Bank Loans

116,799

83.2% 103,071

As of the end of Dec. 2017

Variance

Loans
Investment
Corporation Bonds

Investment Corporation Bonds

2,000

1.4%

2,000

1.5%

0

4th Investment Corporation Bonds without Collateral

1,500

1.1%

1,500

1.1%

0

6th Investment Corporation Bonds without Collateral

3,000

2.1%

3,000

2.2%

0

8th Investment Corporation Bonds without Collateral

1,100

0.8%

1,100

0.8%

0

9th Investment Corporation Bonds without Collateral

1,000

0.7%

1,000

0.7%

0

Total of Investment Corporation Bonds (forinstitutional investors)

8,600

6.1%

8,600

6.3%

0

5th Investment Corporation Bonds without Collateral

6,000

4.3%

6,000

4.4%

0

7th Investment Corporation Bonds without Collateral

9,000

6.4%

9,000

6.6%

0

10th Investment Corporation Bonds without Collateral––

10,000

7.3%

10,000Total of Investment Corporation Bonds (forindividual investors)

15,00010.7%

25,00018.3%

10,00023,60016.8%

33,60024.6%

10,000140,399 100.0% 136,671 100.0%(3,728)Investment Corporation Bonds(for individual investors)

Total of Investment Corporation Bonds

24.6%

75.4%

Status of Credit Rating

75.4% (13,728)

3rd Investment Corporation Bonds without Collateral

23.8%

76.2%

Investment Corporation Bonds(for institutional investors)

Total of Interest-Bearing Debt

As of the end of Dec. 201828

Japan Credit Rating Agency, Ltd.
(JCR)

A+ (stable)

Rating and Investment Information, Inc.
(R&I)

A

(stable)１．Financial Conditions (cont.)
Negative Goodwill

Changes in Appraisal Value (Unrealized Gains)<Policy for Use of Negative Goodwill>
1. Add JPY262 million (50-year amortization amount ofnegative goodwill) to dividends every period(JPY: Bn)
450

2. In addition to above, dividends will be increased in
response to the following
•
•
•
•

•

50-year amortization amount on negative goodwill
Cope with loss on retirement of noncurrent assets
Cope with major renovation works
Total amount
Balance of Negative Goodwill after the end of
December 2018

＜Amount to be used in FY12/2019＞50-year amortization amount on negative goodwill
Cope with loss on retirement of noncurrent assets
Cope with major renovation works
Adjustment for dilution
Total amount
Balance of Negative Goodwill after the end of
December 2019 (forecast)Unrealized Gains

439.3

437.5

122.1

130.7

317.2

306.7

38.5%

42.6%

398.7

Cope with losses caused by property dispositions
Cope with loss on retirement of noncurrent assets
Cope with dilution of dividend per unit
Cope with inconsistency between tax and accounting treatments(Amortization of fixed-term leasehold of land, amortization ofasset retirement obligations, etc.)
Cope with suspension of sales and such due to major renovation
works with significant impact on revenues＜Amount used in FY12/2018＞

Book Value

302.1

300

113.8

78.7
205.4

:
:
:
:

JPY262MM
JPY35MMJPY265MM
JPY563MM

166.2
150

34.8

9.8

284.9
223.3

JPY11,794MM

:
:
:
:
:

JPY262MM
JPY247MM
JPY357MM
JPY310MM
JPY1,177MM

156.3

170.5

6.3%

20.4%

0

Ratio of
Unrealized
Gains

JPY10,616MM

35.2%

39.9%

FY12/2013
FY12/2014
FY12/2015
FY12/2016
FY12/2017
FY12/2018(14th Period) (15th Period) (16th Period) (17th Period) (18th Period) (19th Period)(*) The "50-year amortization amount of negative goodwill" includes amortization, etc. of fixed-termleasehold of land, asset retirement obligations, etc. of Hotel Centraza Hakata and HOTEL ASCENTFUKUOKA, which were purchased in the year ended December 2016 (17th Period).

(*) Unrealized gains are calculated by subtracting book value from appraisal value.

29

Ⅶ. Market Environment

１．Market Environment Japanese demand for domestic travels has been stable Inbound visitors drew the lodging demand The number of overnight guests has been solid
Changes in Number of Overnight Guests in Japan

Changes in Travel Spending among Japanese Travelers(Guest nights in millions)

600

500

(JPY Tn)

30

No. of Japanese Overnight Guests
No. of Inbound Overnight Guests+3.5% +0.0%+6.5% -2.3%
510
510
504
+1.6%
492
+6.0%
474
466

25

439

20

400

Overseas Travel
Domestic Day Trip
Domestic Overnight Travel

23.8
4.4

4.4
300
413
200

432

423

430

+27.3%+33.8%+46.4%

26

33

45

2012

2013

2014

24.2
22.7

4.4

3.8

25.0

25.3

4.0

4.2

4.3
4.5

4.7

4.9

5.0

10

+5.8% +14.8%

14.9

15.4

2012

2013

13.8

15.8

16.0

16.0

5

66

69

80

89

2015

2016

2017

2018
(preliminary)

Source: Statistics of Overnight Travel by Japan Tourism Agency(*) Rounded off to the nearest millions of people.
Numbers for Jan-Nov 2018 are second preliminary figure, numbers for December 2018 are firstpreliminary figure. Final annual numbers for 2018 are planned to be released on June 28, 2019.

31

0

19.3

19.3

3.2

3.2

3.8

3.5

4.5

15

421

CAGR (Compound Average Growth Rate)of Japanese overnight guests+0.3%+11.1%

100

0

429

438

24.5

2014

2015

2016

2017

Domestic
Overnight Travel
+2.9%
12.2

12.6

2017

2018

Jan.-Sep. Jan.-Sep.
Source: Travel and Tourism Consumption Trends Survey by Japan Tourism Agency

１．Market Environment (cont.) The number of inbound visitors increased at a faster pace than
the government's target: 40 million in 2020, 60 million in 2030

 New supply of rooms has been increasing, mainly in Tokyo and
Osaka

Changes in Number of Inbound Visitors

Number of New Supply of Rooms in Hotels/Ryokans in Japan(Thousands)

35,000

ActualNumber of Inbound Visitors
Tourists+8.7%

90,00031,191+21.8%

15,00013,4130

Ratio of New Supply

24,03919,737+47.1%

20,00030,000

Excl. Tokyo, Osaka(%: change from theprevious year)(No. of Rooms)

25,441

5,000

0

8,358

10,000

+1.1%
+0.7%

+2.1%
+1.7%

+3.4%
+2.5%

+4.4%
+3.3%

+5.0%
+4.1%

2016

2017

2018

2019

2020~

16,9690

Ratio of New Supply(%: change from theprevious year)(No. of Rooms)

15,951

18,331

6,107

5,866

+4.1%

+3.8%

+7.4%

+9.3%

+9.8%

2016

2017

2018

2019

2020~

<Osaka>15,000

6,041

5,000
0

2015

<Tokyo>11,828

8,627

10,0002014

86,0875,000

10,8802013

72,27432,98815,00021,049

7,962

2012

16,51720,00010,363
10,000<Japan>53,67160,00028,691+19.4%

30,00025,000

Supply Forecast(No. of Rooms)

2016

2017

Ratio of New Supply(%: change from theprevious year)

2018

Source: Number of International Visitors to Japan by Japan National Tourism Organization (JNTO)(*) The numbers for 2018 Jan.-Oct. are provisional numbers, and Nov.-Dec. are estimated numbers.

32

11,033

9,801

5,018
1,402
+1.8%

+6.3%

+10.2%+11.9%

+9.4%

2016

2017

2018

2019

2020~

Source: Estimated by the Asset Management Company using data from "Public Health Administration Report" by Ministryof Health, Labour and Welfare (MHLW), a weekly hotel & restaurant magazine (HOTERES), and Nikkei Telecom.
(*) Ratio of new supply is the number of new rooms to be supplied in a year to the stock of rooms at the beginning of theyear. With regard to the above data, please note that in case the number of rooms are stated as "to be determined"by hotels, the asset management company has used 180, the average number of new supply of hotel rooms, forcalculation.

１．Market Environment (cont.)
 Setting the specific target, the government is working on the measuresof tourism vision
 Budget of Japan Tourism Agency has increased drastically to support
growth of tourism industry

 Various international events, conferences, and infrastructuredevelopment are scheduled on and after 2019, and further growth of
tourism industry is expected

Japan's Incoming Catalysts for Both Domestic and InboundTravel Demand

Summary of "Tourism Vision to Support the Future of Japan"
Target in 2020

Target in 2030

Number of inbound visitors

40MM

60MM

Spending by inbound visitors

JPY8Tn

JPY15Tn

Inbound overnight guests in rural areas

70MM

130MM

Inbound repeaters

24MM

36MM

Spending by Japanese domestic tourism

JPY21Tn

JPY22Tn

International Events,
Conferences, etc.

Source: Japan Tourism Agency, "Tourism Vision to Support the Future of Japan"(Note) The target figures were written in "Tourism Vision to Support the Future of Japan" which
has set in March 2016 and those are not guaranteed to be accomplished and subject to bechanged drastically.

• Rugby World Cup 2019 • Expansion of New Chitose • 10 consecutive holidays on
Airport International
new Emperor's accession in(nationwide)• 2019 G20 Osaka summit
Terminal
May 2019• 7th International• Shinko Pier Cruise• Large increase in tourism
Terminal (Yokohama)budget following
Conference on African
introduction of International
Development (Yokohama) Expansion
Tourist Tax

2020• Tokyo 2020 Summer• Addition of second• New areas are planned to
runway at Naha Airport
open in Universal Studio
Olympics & Paralympics• Tokyo International Cruise Japan
Games (nationwide)
Terminal is planned to• "Large-scale Development
open in Odaibaat Tokyo Disneyland", newareas and facilities areplanned to open

2021

• World Masters Games
2021 Kansai• 19th FINA World Aquatics
Championships 2021
Fukuoka2022• "Large-scale Expansion• Extention of Kyushu
Project at Tokyo
Shinkansen (Takeo Onsen
DisneySea", new theme
and Nagasaki)
port is planned to open
• Extention of Hokuriku
Shinkansen (Kanazawa
and Tsuruga)

2024• Integrated Resortscommence operation• Addition of second runway
at Fukuoka Airport

66.5

60
40
20
0

20.0

21.0

24.8

2025

9.9

FY2015FY2016FY2017FY2018FY2019Source: Japan Tourism Agency(Note) Budget of Japan Tourism Agency excludes those for Tohoku reconstruction

Others2019

Japan Tourism Agency's Budget(JPY: Bn)
80

Infrastructure
Development, etc.

• World Expo 2025
(Osaka, Kansai Expo
2025)

2027

• Linear Chuo Shinkansenline commences operation

2028• Completion of third
runway at Narita Airport(Note) As events are those scheduled as of November 30, 2018 and may be changed.

33

Appendix 1
JHR's Characteristics and Strategy

１．JHR's Investment Targets
Aim to increase dividend
for mid to long term Highly recognized as Japan's largest J-REIT specializing
in hotels
 High presence and credibility in the property market bycontinuously acquiring properties Capability to propose various acquisition schemes and to
execute acquisitions

High capability in achieving internal growthHighcapability inachievinginternal
growthStrongability inacquiringproperties

 Management approach through active asset management
strategies that achieves a good balance between stability
and upside potential
 Increase in hotel revenue through collaboration with highquality operators
 Attract inbound demand through enhanced international
brand portfolio
 Strengthen and maintain competitiveness by investing inappropriate capital expenditures

Stablefinancingcapability

Stable financing capability
 Secure sound and stable finance Diversify financing methods

35

２．Simultaneous Pursuit of Stability and Upside Potential
 JHR pursues both stability and upside potential by steadily implementing growth strategies

Ensure Stable Revenue

Pursue UpsideManagement
contract structure

Fixed rent structure

Variable rent
structure

Revenue sharing
structure

Active Asset Management Strategies

 Appropriate monitoring of hotel operation
 Capital expenditures to maintain competitiveness and asset value

 Change in rent structures and rebranding Strategic capital expenditures, etc.

Maintain and improve rent-paying capacity of tenants, etc.

Increase in rental income, etc. throughimprovement in hotels' performance

Proportion of Rental Income

Proportion of Rent Structures(Annualized effect (forecast) of FY12/2019)(As of the end of April 2019 (expected))

Fixed rent only(*)

Fixed rent

Variable rent(*)

59.9%

44.6%

11 properties
Variable rent, etc.(*)

32 properties

Variable rent, Rent from revenue sharing andIncome from management contracts

(*)

36

Fixed rent + variable rent structure
Fixed rent + revenue sharing structure
Variable rent structure, Management contract structure

３．External Growth Strategy
Recognition of External
Environment
Trend of the Hotel
Investment Market
 Amid gradually recovering
economy, hotel assets have gained
a firm position as an investment
target due to increase in hotelrevenue resulting from stable
domestic leisure demand andstrong growth of inbound tourists
mainly from Asian countries. On theother hand, since the yields ofother asset classes are decreasing
and investors in hotel investment,
including private funds, areincreasing. Therefore, competition
to acquire hotel assets has become
intense in hotel investment market.
 New supply of hotels is on the rise,
responding to the increasing
number of inbound visitors.
Depending on specifications,locations, capability of hotel
operators, the superiority or
inferiority in competitiveness ofhotel may be seen more clearly.

Basic Policies
 Acquire highly competitive hotel real estate, etc. in areas that have potential to attract "demand byboth domestic and inbound leisure customers" in the medium to long-term
 Improve profitability, stability, and quality of the overall portfolio

Key Measures
 Emphasize the superiority of buildings and facilities (infrastructure), operations (services), and locations of hotel
real estate, etc.

• The prime investment targets are "full-service hotels" and "resort hotels" that have high barriers toentry due to operation and management know-how, capital outlay and locations• In the case of "limited-service hotels," the creditworthiness of the hotel lessee, the age of thebuilding, location, guest room composition and profitability are important• Limited service hotels specialized in selling single rooms are carefully chosen• Especially, proactively review the purchase of hotels that have potential for internal growth as well as
the possibility of synergy effect to the existing properties by implementing active asset management

 Strategic investment areas• Hokkaido area, Tokyo and bay area, Osaka/Kyoto area, Fukuoka area, and Okinawa area

 Investigation and planning of the internal growth strategy upon property acquisition• Investigate the appropriate rent level and rent structure upon renewal, etc., cost reduction
possibilities, and possibilities to improve buildings and facilities• Particularly, if the hotel pays variable rent, etc., promote internal growth through collaboration withlessees and/or operators

37

４． Internal Growth Strategy
Recognition of External
Environment
Hotel Market Environment
 In addition to stable domestic
leisure demand, due to thegovernment policy to promote
tourism nation, the number of
inbound tourists, mainly from
Asian countries, is continuing torise. Amid such growth
expectation for Japan's tourism
and hotel industries, although
there are needs to carefully
monitor some impact by supplyof new hotels and Minpaku(private lodging for a fee),demand for accommodation is
expected to stay firm.

Basic Policies
 Pursue both stability and upside potential by steadily implementing active asset management
strategies

Key Measures Planning and execution of the active asset management in order to realize pursuit in upside revenue• Make strategic CAPEX which will improve profitability and strengthen competitiveness mainly at
hotels with high growth potential• Raise rent and change to rent structures that can achieve upside revenue• Reduction of management contract fee of properties under management contract• Attract inbound demand through rebranding to international brands• Make proactive proposals to build effective hotel operating structures which aim to maximize GOP,
from the perspective of both hotel sales and expenses• Increase hotel revenue through collaboration with high-quality operators
 Planning and execution of strategic CAPEX which secure steady revenue, and monitoring of lessees• Analyze the creditworthiness of hotel lessees, understand hotel income and expenditures, closely
observe and improve rent-paying capacity• Maintain and improve rent-paying capacity of tenants, etc. through capital expenditures, which leadto maintain competitiveness and asset value

38

５．Financial Strategy
Recognition of External
Environment
Trend of Financing Environment
and Interest Rates
 Both number and procurement
amount of public offering(including IPO) by J-REITs in2018 exceeded the previous
year, and those in 2019 has
started favorable as well.
 Issuance of investment
corporation bonds has rapidly
increased, including green
bonds. Spread has been slightly
widening after autumn 2018.
Meanwhile, lending stance byfinancial institutions remains
unchanged.
 Both short-term and long-term
interest rate still remain low.
Although drastic change may
not happen in financial
environment, need to pay close
attention to a fluctuation of
long-tern interest rates
provoked mainly byinternational factors.

Basic Policies
 Ensure healthy and stable finance Strengthen lender formation and relationships with financial institutions
 Diversify financing methods

Key Measures
 Maintain LTV level at a maximum of 50% (total asset base) for the time being
 Diversify financing methods such as public offerings and issuance of investment corporation bonds
 Improve financial stability by extending and diversifying repayment periods and fixing interest rates,etc.
 Optimize borrowing costs

39

６．Initiatives for Sustainability
Aiming for mid to long-term growth to coexist with society and environment and working on to enhance sustainability based onsuitable actions for ESG issues
Sustainability Policy
 JHR and JHRA have established "Sustainability
Policy", which defines material issues andinitiatives for sustainability in our business









Acquisition of BELS Certification(*1) (February 2018)
 JHR has acquired a BELS certification for our two
properties, Hotel Nikko Alivila and Mercure Okinawa
Naha, for the first among J-REIT owned hotels

Mercure Okinawa Naha

Hotel Nikko Alivila

Sustainability Policy
Monitoring and improvement ofenvironmental performance in our portfolio
Promotion of comfortable, healthy, secureand safe hotels
Promotion of ESG in value chains
Consideration for and contribution to local
communities
Initiatives for our officers and employees
Compliance as corporate citizens
Improvement of transparency andengagement with our stakeholders

SMBC Environment Assessment Loan(*2)(March 2018)

 Acquisition of "A" grade
Took out a loan using the SMBC Environmental
Assessment Loan which evaluated JHR's
excellent initiatives for environmental
considerations in asset management

Initiatives at hotel
 Conversion to the LEDs in lightning fixtures• ACTIVE-INTER CITY HIROSHIMA(January 2018)
Converted to the LEDs in atrium at 1st and2nd floor• Oriental Hotel Hiroshima (May 2018)
Converted to the LEDs in the banquet roomat 4th floor in addition to the banquet roomat 3rd floor (December 2017)
Around 75% of the electricity has reduced(preliminary calculation)

GRESB Real Estate Assessment(*3) (September 2018)
 JHR has received a "Green Star" designation, as it is evaluated in both areas "Management & Policy" and "Implementation & Measurement" withregards to initiatives for environmental considerations and sustainability▶ Highest ranking
Acquired「 Green Star 」▶ "GRESB Rating"Acquired「 4-star 」

Key aspects that highly evaluated by the GRESB• Establishment of various sustainability policies, structuring of management
system and initiatives for disclosure• Management and execution system for effective implementation of
governance policies• Conducting assessments of environmental and social risks and measures forenergy and water saving etc. on individual properties• Establishment of cooperation system with stakeholders to monitor andenhance environmental performance(*1) BELS (Building-Housing Energy-Efficiency Labeling System) is a display system of energy conservation performance of a building set by Ministry of Land, Infrastructure, Transport and Tourism.
(*2) "SMBC Environmental Assessment Loan" assesses status of corporate initiatives for environmental considerations, on loan execution and establishment of lending conditions, based on environmental assessment
criteria developed independently by Sumitomo Mitsui Banking Corp. and the Japan Research Institute, Limited(*3) The GRESB is an annual benchmarking program to evaluate ESG considerations of property companies and real estate funds. The GRESB Real Estate Assessment is distinguished by its comprehensive evaluation of
initiatives for sustainability of property companies, REITs and real estate funds, not of individual properties. GRESB rating is a relative evaluation based on comprehensive scores and the highest being "5-stars".

40

７．Benefits Program for Unitholders
JHR implemented benefits program for unitholders to obtain a better understanding, improve their satisfaction and expand theinvestor base. JHR also expanded the benefits program in 2018 by adding three HMJ hotels, aggregated coverage to 18 hotels.


Eligible recipients of complimentary coupons

Details of the benefits program

Complimentary coupons will be sent to those who hold ten or more JHR units at theend of June every year (end of the midterm settlement)<FY2018>
Eligible unitholders: 13,376
Valid period: One year between October 2018 to September 2019

Five complimentary coupons for accommodations andfive complimentary coupons for restaurants(*)
10% discount from the best rate for accommodationby each hotel and 10% discount for restaurants※ The valid period for Hotel Centraza Hakata is April 1, 2019 to September 30, 2019 (plan) due to therenovation works(*) Complimentary coupons for restaurants are only available atselected hotels

Hotels that offer the Benefits Program
The Twelve HMJ Hotels
The Six Accor Hotels

Kobe Meriken Park
Oriental Hotel

Okinawa Marriott
Resort & Spa

New Addition

ヒHilton Natira

Oriental Hoteltokyo bay

Sheraton Grand
Hiroshima Hotel

Namba
Oriental Hotel

Oriental Hotel
Hiroshima

Hotel Centraza Hakata

International Garden Hotel Narita

Hotel Nikko
Alivilaibis Tokyo Shinjuku

ibis Styles Kyoto Station

ibis Styles Sapporo

Mercure Sapporo

Mercure Okinawa Naha

Mercure Yokosuka

Holiday Inn
Osaka Namba

Hotel Nikko Nara

41

Appendix 2
Information on Properties

１．Property List (1/2)(As of December 31, 2018)
Appraisal ValueNo.

Property Name

Hotel Type
(*1)

Grade
(*2)

No. of
Guest
Rooms

LocationAge(*3)

Acquisition
Price(JPY MM)(*4)

Book Value(JPY MM)(*5)

18th Period(As of December 31,
2017)

19th Period(As of December 31,
2018)

Appraisal
Value(JPY MM)CAP Rate

Appraisal
Value(JPY MM)CAP Rate

Investment
Ratio
(*6)

Revenue
P/L fromfrom Real
Real Estate
NOI
Estate(JPY1,000) Operation
Operation(JPY1,000)(*7)(JPY1,000)
(*7)
(*7)

NOI Yield(forecast)(*8)

1

Kobe Meriken Park Oriental Hotel

Full-service

Uppermiddle

319

Hyogo

23.5

10,900

9,988

15,1005.2%

15,8005.2%

3.5%

1,210,096

957,797

640,6748.8%

2

Oriental Hotel tokyo bay

Full-service

Mid-price

511

Chiba

23.7

19,90018,013

34,1004.5%

34,100

4.5%

6.4%

1,888,871

1,770,283

1,357,144

8.9%

3

Namba Oriental Hotel

Limited-service

Mid-price

258

Osaka

22.8

15,00014,69032,7004.3%

32,900

4.3%

4.8%

1,629,254

1,525,885

1,345,405

10.2%

4

Oriental Hotel Hiroshima

Full-service

Uppermiddle

227

Hiroshima

25.3

4,100

4,175

4,280

7.5%

4,350

7.5%

1.3%

424,730

380,299295,573

9.3%

5Hotel Nikko Alivila

ResortLuxury397

Okinawa

24.8

18,90018,24231,5004.9%

31,5004.9%

6.1%

2,048,343

1,899,999

1,578,371

10.1%

6

The Beach Tower Okinawa

ResortMid-price

280

Okinawa

14.8

7,610

6,682

9,820

4.5%

9,810

4.5%

2.5%

511,017467,640

337,615

6.1%

7

Hakone Setsugetsuka

ResortMid-price

158

Kanagawa

12.3

4,070

3,730

5,220

5.0%

5,200

5.0%

1.3%

294,946

270,607179,019

6.6%

8

Dormy Inn Kumamoto

Limited-service

Mid-price

291

Kumamoto

10.9

2,334

2,165

2,960

5.8%

3,000

5.7%

0.8%

194,460

170,564

128,990

7.3%

9the b suidobashi

Limited-service

Mid-price

99

Tokyo

32.4

1,120

1,222

1,940

4.3%

1,940

4.3%

0.4%

109,471

97,76870,426

8.7%

10

Dormy Inn EXPRESS Asakusa

Limited-service

Economy

77

Tokyo

21.8

999

952

1,300

4.1%

1,330

4.0%

0.3%

63,99555,26941,897

5.5%

11

Hakata Nakasu Washington Hotel Plaza

Limited-service

Mid-price

247

Fukuoka

23.9

2,130

2,034

4,330

4.7%

4,440

4.6%

0.7%

240,000

224,000

198,000

10.5%

12Nara Washington Hotel Plaza

Limited-service

Mid-price

204

Nara

18.8

2,050

1,805

2,430

5.2%

2,430

5.2%

0.7%

150,000

134,000

95,000

6.6%

13

R&B Hotel Ueno-hirokoji

Limited-service

Economy

187

Tokyo

16.8

1,720

1,766

1,920

4.1%

1,950

4.0%

0.6%

97,294

83,10669,439

4.8%

14

Comfort Hotel Tokyo Higashi
Nihombashi

Limited-service

Economy

259

Tokyo

10.9

3,746

3,557

5,330

4.5%

5,680

4.4%

1.2%

270,927

240,839

204,667

6.4%

15

Smile Hotel Nihombashi Mitsukoshimae

Limited-service

Economy

164

Tokyo

21.8

2,108

2,030

3,060

4.2%

3,120

4.1%

0.7%

153,465

138,046

117,898

6.5%

16

Toyoko Inn Hakata-guchi Ekimae

Limited-service

Economy257

Fukuoka

17.3

1,652

1,437

2,670

4.7%

2,780

4.5%

0.5%

141,039

127,964

109,285

7.7%

17Hotel Keihan Universal City

ResortMid-price

330

Osaka

17.5

6,000

5,931

13,6005.1%

13,9004.9%

1.9%

822,800

746,999

656,782

12.4%

18

Chisun Inn Kamata

Limited-service

Economy

70

Tokyo

15.7

823

781

1,430

4.5%

1,440

4.5%

0.3%

82,68075,45063,9489.2%

19Hotel Vista Kamata Tokyo

Limited-service

Economy

105

Tokyo

26.9

1,512

1,466

2,000

4.5%

2,040

4.5%

0.5%

115,241

100,12176,255

6.6%

Limited-service

Mid-price

220

Tokyo

10.8

4,800

4,822

8,740

4.0%

8,810

4.0%

1.6%

426,062

360,989

339,516

7.5%

36,1004.3%

39,6004.4%

8.4%

1,992,542

1,694,049

1,521,024

6.5%

(*9)

20

Hotel Sunroute Shinbashi

21

Hilton Tokyo Bay

ResortLuxury

828

Chiba

30.5

26,05026,102

22

ibis Tokyo Shinjuku

Limited-service

Mid-price

206

Tokyo

38.4

7,243

8,061

9,650

4.2%

9,650

4.2%

2.3%

660,122469,556

358,409

6.5%

23

ibis Styles Kyoto Station

Limited-service

Mid-price

215

Kyoto

9.8

6,600

6,687

11,3004.3%

11,500

4.4%

2.1%

548,688473,261436,285

7.2%

43

１．Property List (2/2)(As of December 31, 2018)
Appraisal ValueNo.

Property Name

Hotel Type
(*1)

Grade
(*2)

No. of
Guest
Rooms

LocationAge(*3)

Acquisition
Price(JPY MM)(*4)

Book Value(JPY MM)(*5)

18th Period(As of December 31,
2017)

19th Period(As of December 31,
2018)

Appraisal
Value(JPY MM)CAP Rate

Appraisal
Value(JPY MM)CAP Rate

Investment
Ratio
(*6)

Revenue
P/L fromfrom Real
Real Estate
NOI
Estate(JPY1,000) Operation
Operation(JPY1,000)(*7)(JPY1,000)
(*7)
(*7)

NOI Yield(forecast)
(*8)

24

ibis Styles Sapporo

Limited-service

Mid-price278

Hokkaido

8.4

6,797

6,658

10,5004.9%

10,8004.9%

2.2%

662,395

530,233

451,415

7.8%

25

Mercure Sapporo

Limited-service

Mid-price285

Hokkaido

9.7

6,000

5,923

10,5004.8%

10,7004.7%

1.9%

820,128

532,637

446,866

8.9%

26

Mercure Okinawa Naha

Limited-service

Mid-price

260

Okinawa

9.4

3,000

2,891

7,760

4.8%

7,760

4.8%

1.0%

456,113

373,482

317,981

12.4%

27

the b ikebukuro

Limited-service

Mid-price

175

Tokyo

36.5

6,520

6,609

7,330

4.4%

7,330

4.3%

2.1%

361,036

332,064

295,945

5.1%

28

the b hachioji

Limited-service

Mid-price

196

Tokyo

32.4

2,610

2,698

2,780

5.2%

2,780

5.2%

0.8%

203,227

176,553

146,754

6.8%

29

the b hakata

Limited-service

Mid-price

175

Fukuoka

21.3

2,300

2,355

4,160

4.5%

4,530

4.4%

0.7%

250,689

237,949

216,68010.3%

30

Hotel Francs

Full-service

Mid-price

222

Chiba

27.4

3,105

3,187

4,050

4.7%

4,090

4.7%

1.0%

300,000

237,807194,249

7.7%

31

Mercure Yokosuka

Full-service

Mid-price

160

Kanagawa

25.2

1,650

1,681

2,800

4.7%

2,940

4.7%

0.5%

310,497

198,952

162,129

12.1%

ResortUppermiddle

361

Okinawa

13.9

14,95015,04418,5005.0%

18,6005.0%

4.8%

1,169,917

1,084,541

833,818

7.3%

32

Okinawa Marriott Resort & Spa

33

ACTIVE-INTER CITY HIROSHIMA

Full-service

Luxury238

Hiroshima

8.3

17,32017,561

20,500

4.6%

21,1004.6%

5.6%

1,526,824

1,090,707

893,130

6.3%

34

CANDEO HOTELS UENO-KOEN

Limited-service

Mid-price

268

Tokyo

9.0

6,705

6,689

7,630

4.0%

7,630

4.0%

2.2%

349,971

323,308

283,600

4.8%

35

Hotel Centraza Hakata(*10)

Full-service

Mid-price

194

Fukuoka

33.5

7,197

8,001

8,490

4.7%

8,500

4.7%

2.3%

589,421343,659

119,879

4.8%

36

Holiday Inn Osaka Namba

Limited-service

Mid-price

314

Osaka

10.4

27,00027,13027,200

4.4%

27,200

4.4%

8.7%

1,114,357

1,068,046

920,121

4.0%

37

HOTEL ASCENT FUKUOKA

Limited-service

Economy263

Fukuoka

19.7

4,925

5,178

5,560

4.8%

6,540

4.9%

1.6%

432,801

284,239

248,611

5.8%

38

Hilton Nagoya

Full-service

Luxury

460

Aichi

29.9

15,25015,605

15,7004.2%

15,7004.3%

4.9%

1,390,977

687,096

539,487

4.5%

39

Hilton Tokyo Narita Airport

Full-service

Uppermiddle

548

Chiba

25.4

13,175

13,461

13,4004.7%

13,400

4.7%

4.3%

785,260

720,053

553,599

5.5%

40International Garden Hotel Narita

Full-service

Mid-price

463

Chiba

22.6

9,125

9,259

9,430

4.9%

9,440

4.9%

2.9%

608,931574,674

447,319

6.3%

Full-service

Uppermiddle

330

Nara

20.9

10,373

10,500

11,200

4.9%

11,2004.9%

3.4%

629,260

591,786

462,741

5.7%

–

–

11,099-20.5

309,370

306,789

428,9704.6%

437,5104.6%

100.0%

26,039,666 21,852,832 17,757,520

7.1%

41

Hotel Nikko Nara

Total or Average (41 properties)
(*1)
(*2)
(*3)
(*4)
(*5)
(*6)
(*7)
(*8)
(*9)
(*10)

Under the category of Hotel Type, "Full-service" is full-service hotel, "Resort" is resort hotel, and "Limited-service" is limited-service hotel.
Mainly based on ADR, etc., JHR has classified the hotels into four categories as "luxury," "upper-middle," "mid-price," and "economy."
Average age: Weighted average calculated as follows. The sum of (acquisition price of each property x property age)/Total acquisition price.
The acquisition price in the Purchase & Sale Agreement for the Beneficial Interest in Trust, etc. is indicated. (Consumption tax, amount equivalent to consumption tax, brokerage fee, and other purchase-related costs are excluded.)Book value as of the end of December 2018.
Investment ratio indicate percentage of the acquisition price of the each asset to the total acquisition price. Numbers beyond one decimal place is rounded off.
Actual for a year from January to December 2018. Since the lessees did not agree to disclose numbers in units of JPY1,000 for No. 11 and 12, amounts are rounded down to the nearest JPY million.
NOI yield for the portfolio is calculated as follows: Total NOI for FY12/2018 (actual) ÷ total acquisition price of properties held as of the end of FY12/2018.
Hotel Sunroute Shinbashi is scheduled to be renamed as Sotetsu Fresa Inn Shimbashi-Karasumoriguchi on April 23, 2019.
Hotel Centraza Hakata is scheduled to be renamed as Oriental Hotel Fukuoka Hakata Station on April 9, 2019.

44

２．Summary of Lease Contracts (1/2)(As of December 31, 2018)
No.

Property Name

Lease
Type

1

Kobe Meriken Park Oriental Hotel

2

Oriental Hotel tokyo bay

3Namba Oriental Hotel

4

Oriental Hotel Hiroshima

5

Hotel Nikko Alivila

6

The Beach Tower Okinawa

Fixed-lease

7

Hakone Setsugetsuka

Fixed-lease

8

Dormy Inn Kumamoto

9

Dormy Inn EXPRESS Asakusa

Fixed-lease

Rent
Structure(*1)

Expiration
Hotel Operator/
Lease/
Date of
Hotel Consulting and
MC Term
Contract
Management Company

LesseeContractual Rent(*2)

Rent Modification Summary8

Dec. 2019(Fixed rent)
JPY3,221MM/year+(Variable rent)
In principle, the same rent will be
When the total GOP of theapplied until expiration of thefive HMJ hotels exceeds
contract.
GOP base amount(JPY3,351MM), the excess
x 85% is paid.

Fixed

20

Jun. 2026

JPY42MM/month

Fixed

20

Oct. 2026

JPY24MM/month

Fixed +
Variable

Hotel Management Japan Co., Ltd.

Okura Nikko HotelManagement Co., Ltd.

Fixed-lease

Fixed

Lease

10 Hakata Nakasu Washington Hotel Plaza

Kyoritsu Maintenance Co., Ltd.

The same rent will be applied
until expiration of the contract.
The same rent will be applied
until expiration of the contract.
Rent can be modified through mutual
agreement every three years.

12

Mar. 2023

JPY16MM/month

Fixed

20

Mar. 2020

JPY5MM/month

Lease

Fixed

3

Mar. 2021

JPY20MM/month

11 Nara Washington Hotel Plaza

Lease

Fixed

20

Mar. 2020

JPY11MM/month

12 R&B Hotel Ueno-hirokoji

Lease

Fixed

20

Apr. 2022

JPY8MM/month

Fixed-lease

Fixed+Revenue
sharing

20

Jan. 2028

JPY21MM/month+
Revenue sharing

Rent can be modified through mutual
agreement every three years.
Rent can be modified throughmutual agreement.
Rent can be modified throughmutual agreement.
Rent can be modified throughmutual agreement.
Rent can be modified throughmutual agreement every five
years.
Rent can be modified throughmutual agreement.

13 Comfort Hotel Tokyo Higashi Nihombashi

Washington Hotel K.K.

Greens Co., Ltd.

Rent Modification Summary(After acquisition)
TimingCondition

Jan. 2016 Structure was modified

－

－

－

Apr. 2017
Apr. 2017
Apr. 2018－
Apr. 2011
Apr. 2018

Same
Contract was renewed(same)
Contract was renewed(same)－
Increased(+3.0%)
Same(Introduced revenue
sharing)Renewed(same)

14 Smile Hotel Nihombashi Mitsukoshimae

Lease

THE KAMOGAWA GRAND HOTEL, LTD

20

Mar. 2020

Lease

Fixed

Toyoko Inn Co., Ltd.

30

Sep. 2031

JPY11MM/month

No rule has been stipulated.

Oct. 200716 Hotel Keihan Universal City

Lease

Fixed+Revenue
sharing

K.K. Hotel Keihan

20Jun. 2021

Nondisclosure(*4)

Nondisclosure(*4)

Jul. 2014 Structure was modified.

2

Dec. 2019

Hotel GOP x 86%(If it is below zero, it will
be JPY0)

4

Dec. 2021

JPY7MM/month +Revenue sharing

15

Mar. 2023

4

Dec. 2022

12

Jun. 2024

18 Hotel Vista Kamata Tokyo

Lease

Fixed+Revenue
sharing

19 Hotel Sunroute Shinbashi

Fixed-lease

20 Hilton Tokyo Bay
21 ibis Tokyo Shinjuku
22 ibis Styles Kyoto Station
23 ibis Styles Sapporo
24 Mercure Sapporo
25 Mercure Okinawa Naha

Solare Hotels &Resorts Co., Ltd.

SHR Hotels, Co., Ltd.

Vista Hotel Management Co., Ltd.

Fixed+Revenue
Sotetsu Hotel Management Co., Ltd.(*3)
sharing
THE DAI-ICHI
Fixed+Revenue
Hilton International
Fixed-leasesharing
BUILDING CO., LTD.
Company
Management–
contract
Management–
contract
Management–－
AAPC Japan K.K.
contract
Management–
contract
Management–
contract

26 Mercure Yokosuka

Fixed-lease

27 the b ikebukuro

Fixed-lease

28 the b hachioji

Fixed-lease

29 the b hakata

Fixed-lease

30 the b suidobashi

Fixed-lease

Variable
Fixed +
Variable
Fixed +
Variable
Fixed +
Variable
Fixed +
Variable1

Dec. 20195

Dec. 201915

Sep. 2029

10

Apr. 2024

AAPC Japan K.K.

5

Aug. 2019

Ishin Ikebukuro Operations K.K.

7

Jan. 2022

Ishin Hachioji Operations, Y.K.

7

Jan. 2022

Ishin Hakata Operations K.K.

7

Jan. 2022

Ishin Suidobashi Operations K.K.

5

Jun. 2020

45

JPY18MM/month +Revenue sharing
JPY163MM/month +Revenue sharing
Amount equivalent tohotel GOP
Amount equivalent tohotel GOP
Amount equivalent tohotel GOP
Amount equivalent tohotel GOP
Amount equivalent tohotel GOP
Linked to hotel GOP
JPY163MM/year +Linked to hotel GOP
JPY98MM/year +Linked to hotel GOP
JPY82MM/year +Linked to hotel GOP
JPY85MM/year +Linked to hotel GOP

In principle, the same rent will beapplied until expiration of thecontract.

－－

15 Toyoko Inn Hakata-guchi Ekimae

Variable－－

JPY11MM/month +Revenue sharing

Fixed-lease

To be expired(Dec.)－

Fixed+Revenue
sharing

17 Chisun Inn Kamata

Rent Modification Schedule(2019 to 2020)
2019
2020

Apr. 2017

Increased (+9.4%)

－
－
－

－

－

To be expired(Mar.)

－

－

－

－

－

To be expired(Mar.)－－－－

Renewed(the calculation method To be expired
Jul. 2017of variable rent was(Dec.)
modified)
Contract was renewed(the calculation method
Jul. 2015－of revenue sharing was
modified)

No rule has been stipulated.

－

Rent can be modified throughmutual agreement.

Jan. 2019－
To be
discussed(Apr.)To be expired(Mar.)

－

－

－

－

－

Renewed(Increased)
Changed to
management contract

Renewed(Jan.)－－－–

Jul. 2012

–

－

－

–

Dec. 2014

Changed to
management contract

To be expired(Dec.)To be expired(Dec.)

–

－

－

－

－

–

－

－

－

－

－

－

To be expired(Aug.)

－

－

－

－

－

－

－

－

－

－

－

－

－

Jul. 2015

Rebranded－

To be expired(June)The same rent will be applied
until expiration of the contract.
The same rent will be applied
until expiration of the contract.
The same rent will be applied
until expiration of the contract.
The same rent will be applied
until expiration of the contract.
The same rent will be applied
until expiration of the contract.

－－

２．Summary of Lease Contracts (2/2)(As of December 31, 2018)
No.

Property Name

31 Hotel Francs

Lease
Type

Rent
Structure(*1)

Fixed-lease

Fixed

32 Okinawa Marriott Resort & Spa

Fixed-lease

Fixed +
Variable

33 ACTIVE-INTER CITY HIROSHIMA

Fixed-lease

Fixed +
Variable

34 CANDEO HOTELS UENO-KOEN

Fixed-lease

Fixed

LesseeExpiration
Hotel Operator/
Lease/
Date of
Hotel Consulting and
MC Term
Contract
Management Company

K.K. Bridal Produce

Lagoon resort Nago Co., Ltd.

K.K. A.I.C Hiroshima
Management

Luxury Hotels
International of
Hong Kong Limited.

Candeo Hospitality Management, Inc.

19

Oct. 2024

5

Dec. 202011

Dec. 2026

20

Feb. 2030

Contractual Rent(*2)
JPY25MM/month(Fixed rent)
JPY550MM/year +(Variable rent)
When the total GOP
exceeds GOP baseamount (JPY700MM), theexcess x 90% is paid.
(Fixed rent)
JPY348MM/year +(Variable rent)
When the total GOP
exceeds GOP baseamount (JPY468MM), theexcess x 82.5% is paid.
Nondisclosure(*4)(Fixed rent)
JPY400MM/year +(Variable rent)
When the total GOP
exceeds GOP baseamount (JPY425MM), theexcess x 90% is paid.
(Fixed rent)
JPY576MM/year(Variable rent) +when the total GOP
exceeds GOP baseamount (JPY650MM), theexcess x 92.5% is paid.

Rent Modification Summary
The same rent will be applied
until expiration of the contract.

Rent Modification Summary(After acquisition)
TimingCondition

Rent Modification Schedule(2019 to 2020)
2019
2020

－

－

－

－

In principle, the same rent will beapplied until expiration of thecontract.

－－－

To be expired(Dec.)

In principle, the same rent will beapplied until expiration of thecontract.

－

－

－

－

Jul. 2016

Renewed－－In principle, the same rent will beapplied until expiration of thecontract.

－－

To be expired(Dec.)－

In principle, the same rent will beapplied until expiration of thecontract.

－

－

－

－

Rent can be modified throughmutual agreement every three
years.

35 Hotel Centraza Hakata

Fixed-lease

Fixed +
Variable

Hotel Centraza Co., Ltd.

4

Dec. 201936 Holiday Inn Osaka Namba

Fixed-lease

Fixed +
VariableOW Hotel Operations KK

15

Oct. 2031

37 HOTEL ASCENT FUKUOKA

Lease

Fixed

NIKOH SANGYO co., Ltd.

20

Apr. 2019

Nondisclosure(*4)

Rent can be modified throughmutual agreement every three
years.

Apr. 2019

Renewed(Apr.)－

38 Hilton Nagoya

Lease

Variable41

Dec. 2029

Nondisclosure(*4)

Rent can be modified throughmutual agreement.

Changed to fixed-termlease contract andrenewed the contract(Increased)

－

－

－

－

In principle, the same rent will beapplied until expiration of thecontract.

－

－

－

－

In principle, the same rent will beapplied until expiration of thecontract.

－

－

－

－

In principle, the same rent will beapplied until expiration of thecontract.

－

－

－

－

Hilton Tokyo Narita
AirportNagoya Hilton Co.,Ltd.

Hilton International
Company

Fixed-leas

Fixed +
Variable

KK NaritaKosuge Operations

20

Jun. 2037

40 International Garden Hotel Narita

Fixed-lease

Fixed +
Variable

KK NaritaYoshikura Operations

10

Jun. 2027

41 Hotel Nikko Nara

Fixed-lease

Fixed +
Variable

Hotel Management
Okura Nikko Hotel
Co., Ltd.
Management Co., Ltd.

3

Dec. 202039(*1) Rent structure is as follows:
Fixed: Fixed rent
Variable: Variable rentManagement contract: Management contract
Fixed + Variable: Property paying both fixed and variable rent
Fixed + Revenue sharing: When the sales of the hotel (lessee) exceed pre-determined amount, additional rent is paid

(Fixed rent)
JPY444MM/year(Variable rent) +When the total GOP
exceeds GOP baseamount (JPY550MM), theexcess x 86.5% is paid.
(Fixed rent)
JPY336MM/year +(Variable rent)
When the total GOP
exceeds GOP baseamount (JPY360MM), theexcess x 98% is paid.
(Fixed rent)
JPY420MM/year +(Variable rent)
When the total GOP
exceeds GOP baseamount (JPY470MM), theexcess x 91.5% is paid.

(*2) Amount including car park and CAM without tax.
(*3) The lessee is scheduled to change to Sotetsu Hotel Development Co., Ltd. on May 1, 2019.
(*4) The detailed content of the contract is not disclosed as consent on disclosure has not been obtained from the lessee.

46

３．Major CAPEX Ⅲ by Hotel* (Numbers in parentheses are CAPEX amounts: JPY MM)
FY12/2012

FY12/2013

FY12/2014

FY12/2015

FY12/2016

FY12/2017

Bridal salon (76)-FY12/2018

FY12/2019 Plan

Kobe Meriken Park
Oriental Hotel

-

-

-

Chapel (36)

Guest rooms on 7F(50)
Balconies on eachfloor (62)Bar (85)

Oriental HotelTokyo Bay-

Restaurant (45)--

Guest rooms on 4F(101)

Guest rooms on 11F to
12F (140)-

Namba Oriental
Hotel

-

Corner rooms on
5F to 8F (10)--Guest rooms on 9F Guest rooms on 7F
Guest rooms on 6F (78)
(91)
(77)

-

-

Guest rooms on 3F to
8F of North building
and 3F to 5F ofcentral building (333)-

Guest rooms on 9F(55)
Restaurant (31)-Guest rooms on 1F, etc
(16)

-

-

Guest rooms on 7F
to 10F (43)Banquet room on
4F (38)-Chapel (10)Guest rooms on 13F to
14F (14)

Guest rooms on 3F Guest rooms on 3F
to 10F (192)
to 10F (312)--

Hotel Nikko Alivila-

Restaurant (30)
Private rooms at
Conversion to guest
restaurant and balcony,
rooms from brides room
etc. on 3F (19)(40)

Oriental Hotel
Hiroshima--

Banquet room on 23F(10)

Ibis Tokyo
Shinjuku

Lobby and restaurant
on 2F, and guest
rooms on 3,5,7,9F
(170)

-

-

-

Holiday Inn
Osaka Namba

-

-

-

-

-

-

Guest rooms on
4,6,7,12F (115)

Guest rooms on 10F to
11F (72)

ibis Styles Sapporo

-

-

-

-

-

-

Vacant space on 1F (28)-

Mercure Hotel
Sapporo

-

-

-

-

-

-

Banquet room (15)-the b Ikebukuro

-

-

-

-

-

-

Guest rooms on 3F to
10F, etc. (18)-

Okinawa Marriott
Resort & Spa

-

-

-

-

-

-

-

Restaurant (140)
Renewal of lounge,
conversion to guest
room, etc. (30)

Hotel Centraza
Hakata

-

-

-

-

-

-

-

Major renovation works(1,263)

Hotel Nikko Nara

-

-

-

-

-

-

-

Guest rooms on 8F
(128)

47

４．The Five HMJ Hotels – Highlights
Changes in GOP and GOP Ratio(JPY MM)

GOP

10,000
6,296

6,000

5,136

5,696

5,645

5,158

4,000
2,000
0

27.0%

CY200824.3%
CY2009

26.6%

25.5%

26.5%

CY2010CY2011CY2012

6,155

6,302

28.0%

28.3%

CY2013

CY2014

7,591

6,941

7,765

8,033

8,134

45%

35%
31.8%

32.8%

CY2016

CY201729.9%

CY2015

34.2%

33.7%
25%

CY2018CY2019GOP Ratio

GOP

8,000

GOP ratio

15%(forecast)

Changes in KPI(JPY)
20,00018,00016,000ADR
77.9%

17,97014,00012,00077.8%

18,463

13,99914,367

CY2007

CY2008

RevPAR
73.8%
17,197

12,696
CY2009OCC
80.4%

15,98012,845
CY201076.7%

15,846

82.7%

16,20013,40012,160CY2011CY2012

86.1%

17,29786.9%
17,551

87.7%

19,212
16,843

14,886
CY2013

88.4%

91.0%

89.9%

91.9%

20,153

19,856

20,112

20,26917,80718,06018,08018,620CY2015

CY2016

CY2017

CY2018CY2019(forecast)

48

80%
60%
40%
20%

15,245
CY2014

100%

0%

OCC

ADR・RevPAR

22,000５．Portfolio Map
Total Assets

Limited-service hotel

JPY3,745Bn(as of the end of April, 2019 (expected))

Full-service hotel

1

2

3

4

5

6

7

8

Resort hotel

No. of Hotels

43 hotels

24

25

Kobe Meriken Park
Oriental HotelNo. of
Guest Rooms

11,676 rooms

23

28

Namba Oriental
Hotel

Oriental Hotel
Hiroshima

12

13

Hotel Nikko Alivila

9

10

11

the b
suidobashi

Dormy Inn
EXPRESSAsakusa

Hakata Nakasu
Nara Washington R&B Hotel
Washington Hotel Hotel Plaza
Ueno-hirokoji
Plaza

The BeachTower Okinawa

HakoneSetsugetsuka

Dormy Inn
Kumamoto

14

15

16

17

18

Comfort HotelTokyo Higashi
Nihombashi

Smile Hotel
Nihombashi
Mitsukoshimae

Toyoko Inn
Hakata-guchi
EkimaeHotel Keihan
Universal City

Chisun Inn
Kamata

27

19

20

21

22

23

24

25

26

Hotel Vista
Kamata Tokyo

Hotel Sunroute
Shinbashi

Hilton Tokyo Bay

ibis Tokyo
Shinjuku

ibis Styles
Kyoto Station

ibis Styles
SapporoMercureSapporoMercure Okinawa the b ikebukuro
Naha

2 30

3 17 36 42

11 16
29 35 37

7

39 40

31

21

38

8

Oriental Hoteltokyo bay

1

12 41

32

28

29

30

31

the b hachioji

the b hakata

Hotel Francs

Mercure Yokosuka Okinawa Marriott
Resort & Spa

33

35

34

Tokyo 23 wards

4 33
13 34

27
22
5
32
26

9
20

15

10
14

ACTIVE-INTER CITY
CANDEO HOTELSHIROSHIMA (Sheraton UENO-KOEN
Grand Hiroshima Hotel)

Hotel Centraza Hakata

Acquisition in 2019
36

37

38

39

40

41

Holiday Inn
Osaka Namba

HOTEL ASCENTFUKUOKA

Hilton Nagoya

Hilton Tokyo Narita
AirportInternational
Hotel Nikko Nara
Garden Hotel Narita

42

43

43

6
18
19

49

Hotel Oriental Express Hilton Tokyo Odaiba
Osaka Shinsaibashi

Appendix 3
Investors Composition and Investment Unit Price

１．Major Unitholders and Classifications of Unitholders
Top 10 Major Unitholders
As of the end of June 2018

As of the end of December 2018

Name

Rank

No. of Units

%(*)

Rank

Name

No. of Units

%(*)

1

The Master Trust Bank of Japan, Ltd. (Trust)

626,327

15.61

1

The Master Trust Bank of Japan, Ltd. (Trust)

629,007

15.68

2

Japan Trustee Service Bank, Ltd. (Trust)

537,982

13.41

2

Japan Trustee Service Bank, Ltd. (Trust)

492,388

12.27

3

Trust and Custody Services Bank, Ltd. (Securities Investment Trust)

183,975

4.58

3

The Nomura Trust and Banking Co., Ltd. (Investment Trust)

190,271

4.74

4The Nomura Trust and Banking Co., Ltd. (Investment Trust)

159,993

3.98

4

BNYM AS AGT/CLTS 10 PERCENT

146,423

3.65

5

The Bank of New York, Non-Treaty JASDEC Account99,920

2.49

5

Trust and Custody Services Bank, Ltd. (Securities Investment Trust)

122,691

3.05

6State Street Bank & Trust Company 505012

73,839

1.84

6

JP Morgan Chase Bank 385628

65,100

1.62

7

Shikoku Railway Company

65,100

1.62

7

STATE STREET BANK WEST CLIENT TREATY 505234

62,5791.56

8State Street Bank & Trust Company 505223

59,006

1.47

8

Shikoku Railway Company

58,311

1.45

9

CBNY DFA INTERNATIONAL REAL ESTATE SECURITIES PORTFOLIO

58,311

1.45

9Mizuho Trust & Banking Co., Ltd.

55,166

1.37

57,373

1.43

10 State Street Bank & Trust Company 505223

52,3131.30

1,921,826

47.91

1,874,249

46.72

10 STATE STREET BANK WEST CLIENT TREATY 505234
Total

Total

(Note) The total units held by each investor to the total units issued by JHR as of the end of June 2018 and the end of December 2018 respectively. (Rounded off to two decimal places.)

Owners of the Investment Units
As of the end of June 2018
OwnersNo. ofInvestors

Individuals & Others

30,413

No. ofUnits
387,302

Financial Institutions(Incl. Securities Firms)

146

1,836,662

Other Domestic Firms

362

113,987

Foreign Firms &Individuals

356

1,672,896

Total

No. of Investors

0.4%

As of the end of December 2018

No. of Units

1.1%
1.1%

9.6%
41.7%
45.7%

97.2%

31,277 4,010,847
Individuals &Others2.8%
Financial Institutions(Incl. Securities Firms)

No. of
Units

OwnersNo. ofInvestors

Individuals & Others

30,293

407,254

Financial Institutions(Incl. Securities Firms)

151

1,869,433

Other Domestic Firms

357

109,488

Foreign Firms &Individuals

354

1,624,672

Total

31,155 4,010,847

Other Domestic
Firms

Foreign Firms &Individuals

No. of Investors

0.5%

No. of Units

1.1%
1.1%

10.1%
40.5%
46.6%

97.2%

2.7%

(*) Percentage of investors is percentage of owners in each segment to the total number of investors in JHR, and percentage of investment units is percentage of investment units owned by each segment to the total investment units issued as ofrespective date. (Both rounded off to one decimal place.)51

２．Changes in Investment Unit Price and Market Capitalization
Changes in the investment unit priceand market capitalization

Jun. 2015
PO(*2) JPY10.7Bn(Based on the closing price)
Price of the investment unit:

JPY81,900

Total market capitalization:

JPY328.5Bn(JPY)
120,000

100,000(Based on the closing price of January 31, 2019)
(*1)

(*2)

Price of the real estate investment securities
may fall depending on the fluctuations ofprice of the real estate under management
or profitability, etc., and investors may
suffer losses. Investors may also suffer
losses through the bankruptcy ordeteriorated financial condition of the issuer.
With reference to the risk of investment in
JHR units, please see Securities Report
dated March 20, 2018.
including OA

Comparison withREIT Index and TOPIX of
Tokyo Stock Exchange
(TSE)
(*)

100 is the closing price of JHR unit, REIT
index and TOPIX at TSE dated April 2, 2012.
REIT Index of TSE is an index of a weighted
average of the market capitalization of all
REITs listed on TSE.

80,00060,000Market Capitalization
Investment Unit Price of JHR

Apr. 2013
PO JPY20.5Bn

Jan. 2016
PO(*2) JPY146Bn

Jul. 2016
PO(*2) JPY34.7Bn

Jun. 2017
PO(*2) JPY18.6Bn

Jan. 2019
PO(*2) JPY33.3Bn(JPY MM)

Jan. 2015
PO(*2) JPY15.6Bn

450,000

Sep. 2014
PO JPY10.1Bn

300,000

Sep. 2012
PO(*2) JPY5Bn
150,000

40,00020,00000600

Investment Unit Price of JHR

TSE REIT Index

500

400

300

200

100

0

52

TOPIX

Appendix 4
Summary of the Asset Management Company

１．Summary of the Asset Management Company
Company

Japan Hotel REIT Advisors Co., Ltd.

Location

Ebisu Neonato 4F, 4-1-18 Ebisu, Shibuya-ku, Tokyo 150-0013

Establishment
CapitalShareholders
Representative Director

August 10, 2004
JPY300MM as of June 30, 2018
Rockrise Sdn Bhd, Kyoritsu Maintenance Co., Ltd., ORIX Corporation
Hisashi Furukawa
Building Lots and Buildings Transaction Business Operator, Governor of Tokyo (3) No. 83613
Discretionary Transaction Agent by Minister of Land, Infrastructure, Transport and Tourism No. 38

Registration and Licenses

Financial Instruments Trading Company, Director-General of Kanto Local Finance Bureau No. 334
Member of The Investment Trusts Association, Japan
Member of The Japan Investment Advisers Association<Organization Chart>

Shareholders' Meeting
AuditorBoard of Directors' Meeting

Investment (and Operation)
Committee

Compliance Committee
Representative Director
Compliance Office

Investment Division

Acquisitions

Public REIT

Operations Division

Finance & Planning Division

Private Fund

Finance & Planning54

Accounting &ReportingGeneral Affairs

Investor Relations

２．Features and Governance of the Asset Management Company
Mission Statement"Provide attractive hotel investment opportunities to investors as specialist in investment and management of hotel assets. Gain
trust from our stakeholders, and contribute to local communities and society through investing and managing hotel assets."

Code of Conduct
As an independent asset management company, all employees and officers at JHRA should have a "spirit of challenge" aiming
to constantly provide high added value.
Also, "teamwork" is inevitable to provide high added value.
JHRA recognizes "challenge" and "teamwork" as essential value which our code of conduct is based upon.

Challenge

Teamwork Respect teamwork and collaborate with team-mates Be a self-starter, take initiative and demonstrate drive Respect others. Respect values and opinions of others Set high goal and strive Promote "sharing" (idea, knowledge, information, goal,
achievement, joy of achievement, lesson, etc.)

 Respect creativity and innovation
 Promote challenge, free from fear of failure Make effort for open, frank and sincere communication

55

２．Features and Governance of the Asset Management Company (cont.)
Advanced Expertise Ability to propose transaction scheme, execute transaction, and plan and execute unprecedented measures of asset
management based on in-depth understanding of hotel operation and track record of such asset management.
 Extensive experience of renovation and rebranding through collaboration with many hotel lessees and hotel operators.
 Strong and long-term relationships with a large number of hotel lessees and hotel operators.
 High analytical skills and accurate judgement capacity based on rich information and data obtained through a broad
network and high credibility.

Ensured Independence No employee of JHRA is a seconded employee from sponsor.
 Part-time directors from our main sponsor, SC CAPITAL PARTNERS group and non-sponsor-related full-time directors
each account for half of JHRA's board of directors.
 With regard to transactions with sponsor-related parties and JHR, JHRA has set strict decision-making rules.
In principle, in addition to obtaining approval by Compliance Committee which includes an outside specialist, who isauthorized to dismiss proposals, JHRA is required to obtain approval from JHR's board of directors' meetings(directors are all third-party members who do not have any relationship with the sponsor-related parties).
 As our main sponsor, SC CAPITAL PARTNERS group is also an independent asset management company, it fully
understands and respects importance of JHRA's independency. JHRA conducts asset management business based
upon its own judgement.

56

Disclaimer
This material is prepared and provided solely for the purpose of providing information and not to offer, solicit, or do business, etc. with specific products
including purchase of investment units, investment unit subscription rights, or investment corporation bonds of Japan Hotel REIT Investment Corporation("JHR") or any other particular products. If any discrepancy is identified between this translation and the Japanese original, the Japanese original shall prevail.
This material is neither a disclosure document nor an investment report required under or prepared pursuant to the Financial Instruments and Exchange Act,Act on Investment Trusts and Investment Corporations and related government ordinances, Cabinet Office regulations, listing rules by Tokyo Stock Exchange,
Regulations of The Investment Trusts Association, Japan, or other related rules and regulations.
This material contains forward-looking statements about financial conditions, operational results, and businesses of JHR, as well as plans and intentions of JHR
and its asset management company, Japan Hotel REIT Advisors Co., Ltd ("JHRA"). Such forward-looking statements involve known and unknown risks,
uncertainties, and other factors that may cause actual results or performance of JHR to materially differ from those expressed or implied forecasts. Those
forecasts are made based on JHR's present and future business strategies and assumptions relating to the political and economic circumstances surrounding
JHR in the future.
Every effort has been made to ensure the accuracy of the information contained in this material. However, there can be no assurance that the information isaccurate, complete, appropriate or fair. The information may be revised or retracted without prior notice.
Regarding the offering and trading of investment units, investment unit subscription rights or investment corporation bonds, financial institutions may charge
you pre-determined handling fees and other charges aside from the price of the investment units, investment unit subscription rights or investment corporation
bonds. Since neither JHR nor JHRA handles the offering and trading of investment units, investment unit subscription rights or investment corporation bonds,
please ask financial institutions for the amount, upper limit, and calculation methods of such fees and other charges.
JHR mainly invests in real estate-related assets, primarily hotels which are subject to change in values. Therefore, unitholders, holders of investment unit
subscription rights and investment corporation bonds may suffer losses due to economic conditions of the real estate market or securities market, economic
situations including interest rate environment, the nature of investment units, investment unit subscription rights, and investment corporation bonds,
dependency on mechanisms and related persons of investment corporations, changes in legal systems related to real estate (include tax regulations, building
regulations and others), damage caused to the real estate-related assets by natural disasters, fluctuation in prices or profitability of the real estate-related
assets, nature of the trust beneficiary rights under management, delisting of the investment units, or worsening financial position or insolvency of JHR.
For details, please refer to the Articles of Incorporation, Securities Registration Statement, Annual Securities Report and Extraordinary Report, etc. of JHR.
The contents of this material may not be copied or reproduced without our prior permission.
Japan Hotel REIT Advisors Co., Ltd.
Financial Instruments Trading Company
Director-General of Kanto Local Finance Bureau No. 334
Member of The Investment Trust Association, Japan
Member of The Japan Investment Advisers Association

57